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Foreclosure Forum |
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Not worth anything to you..In Reply to: foreclosing off liens to get seller more equity posted by David on August 27, 2003 at 10:45 AM : A homeowner called me with the following scenario: owes 265k on 1st TD which was renegotiated (post - Ch. 7) to a 9% 40 year note. Also owes 10K on 2nd TD, but he's not paying on it and is not personally liable (discharged in Ch. 7, but still attached to the house). He has 60K of liens (child support, judgements, etc.) Total debt $335k plus interest on 2nd TD and liens. He cannot afford payments and wants to sell. House is worth $360-375k. It's been on the market for 2 1/2 months at $409K because the owner wanted to net $50K after Realtor fees. Obviously, he's dreaming and now starting to realize this. I proposed $10k to have him deed over the house. Homeowner wants me to buy the first, foreclose off everything else and get him more equity. My questions are: : If there is a higher bid at the foreclosure auction than the amount of the first and second mortgages(approx $275k), do other lienholders get paid before the owner, or are they extinguished by the foreclosure? : Are there any other "holes" in this fellow's plan? : How would you approach this one? -=-=-=-=-=-=-=-=-=-=- David, If you were able to purchase the 1st trust deed and then proceed to foreclose on it the foreclosure aucton would probably produce a winning bid of $300K to $320K, so let's say in the middle or $310K. So that sale would only produce $45k of overbid to be dribbled out to $65K in junior liens. The overbid goes in a downward spiral, in a protanto distribution, to each successive lien holder, paying each off in full until the overbid is exhausted. The owner would get none of the overbid in this scenario. And all liens and interests junior to the foreclosing 1st would be wiped off the title of the property. Of course you would have to be the highest bidder to get the trustee's deed to the property. The biggest hole in this fellow's plan is that he won't be receiving anything that I can see. Follow Ups: Post a Followup:
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