Buying an NPN with equity at the property level

[Chris Kinder]

Hello everyone,
I am going under contract to buy a non-performing note on an apartment bldg in New York City. The outstanding note balance is $235k and the accepted price with the note holder is $200k (84 cents on the dollar). You may initially think the price were paying is high, but the original loan was only 55% LTV and the collateral itself has not lost much if any value as NYC multifamily market has remained strong. Our conservative estimate is a stabilized fee simple value of $450-500k.

The borrower ceased payment in sept '10 and a foreclosure commenced April '11. Its not clear yet why they couldn't make payments (will investigate during DD).

My question for you legal minds out there is what rights does the borrower have to sell the property during a foreclosure where equity (I think) clearly exists? They have not made any attempts to do so yet. And if they do not and it goes to an foreclosure auction what do you as the possible outcomes for me as a note holder? Is there any likelihood that I can get to this asset, which is of course what we want?

Thanks!
Chris