Buying a foreclosure I'm renting (tenants, auction, mortgage, mortgages)

[Tenzo]

I'm currently renting a unit that the condo association seized to pay off past assesments.

I received notice Friday that it will go up for a foreclosure auction on Jan 11 and that we have 30 days after the aution to vacate. (yawn. Sent them a copy of the Protecting Tenants at Foreclosure Act (PTFA). They acted like they had never heard about it. But will never the less abide by it)

We like the place and would like to stay.
I am in the position that I can just write a check for the amount of the unit. No mortgage. Nice and clean.

Or is it?

1) What should I make sure I know about?
2) What is the best way to contact the bank and tell them I want the property? Perhaps snag it before the auction.
3) how the heck do I get this done in the next two weeks?

[Zippyman]

you can't "snag it before the auction", the bank doesn't currently own it. You can bid at the auction, but you'll want to talk to a title company to make sure you're bidding on a first lien and not a second lien. There's a big difference.

In most cases, you'll need a cashier's check for the full bid amount either the day of the auction, or at most a few days later.

Some banks bid the full loan amount at the auction, even if the property isn't worth that much so they can sell the property at retail.

[SouthernBelleInUtah]

You also need to investigate the financial health of the condo association. How many units are vacant or seized? Any upcoming assessments for maintenance? What's the amount of the association's bank balance? How many units are rented v.s owner-occupied? Lots of other questions I haven't thought of!

[Lacerta]

Also, you'll want to make sure there are no other liens against the property that will survive the auction. I know in my county, utility liens attach to the new owner, and the utility companies will not turn service on unless the prior bill is paid. Since you are currently renting (and thus presumably have all utilities in your name), this probably isn't a problem, but you should double check. We've had to pay up to $1700 in unpaid sewer/water/trash bills unpaid by the prior owner on a property we bought at foreclosure in order to get the water turned on. And yes, it was legal for them to do so, in my county.

In order to buy it before the auction, you would have to negotiate with the owner. Assuming they are upside down on the loan (owe more than it is worth), it would have to be done as a short sale. Many lenders (meaning the owner's lender, not yours, so the fact that you are cash is only of minor importance in a short sale) will not even start a short sale on a property scheduled to go to foreclosure in less than 30 days, so it is next to impossible that you could get a short sale pushed through, especially since the house isn't even currently listed for sale. Most lenders want the house to be marketed for sale before approving a short sale, to ensure that they are getting the best possible price for it.

The only way to "snag it" before the auction, then, would be to pay cash for the full balance that the seller owes (or whatever they cannot afford to pay themselves. So if they owe $150k, and can come up with $20k, you would have to pay $130k, even if the property is really only worth $80k.

At the auction, it could go for market value, or the full amount owed (+ expenses) or even less than market value. I've seen them all. I've seen some lenders who just take a certain percentage of the amount owed, regardless of the market value, which means sometimes you can get it for a steal.

The short version is that the only way to GUARANTEE that you are the buyer on the property would be to buy it direct from the owner now, for whatever they owe. Since that is probably over market value (possibly WAY over market value), I would not recommend that option. Otherwise, you just bid at auction against everyone else and see if you can win it. Or if the asking price at auction is crazy high, you have to wait for it to come back up for sale and try to buy it from the bank, but other people will also be able to make offers on it at that point too.

There is no reasonable way to guarantee that you are the person who buys the house.

And pay close attention to what Zippyman said about making sure you are buying the 1st lien if you do bid at auction. If the condo is foreclosing, make sure you aren't just buying their right to a lien.

[Tenzo]

Decided to retain a lawyer.

This is just too much money to 'wing it'

[Okey Dokie]

Originally Posted by Tenzo

Decided to retain a lawyer.

This is just too much money to 'wing it'

Dang! For once, someone with some smarts posting here.

[Tenzo]

Just as an FYI

The title search showed up three different mortgages and a lein on the place.
So I decided this was just too much complication. Especially since each mortgage was being auctioned seperatly.

Someone else felt it was worth the risk.
They bought the primary mortgage from the bank, for 80% of it's value.
Then they went ahead and put the money owed for the lien in escrow.

Thinking they had everything wrapped up they tried to serve the tenants (us) with the 30 eviction notice.

Nice try.
There is still the other minor mortgages that are going up for auction. So they own 90% of the condo. They can't ask us to leave until they own 100% of it.

I feel bad for them. They dropped $385K on a condo worth $450K. Looked like a good deal, but now they are chasing down the two other mortgages and it may take quite a lot of time.

I can't imagine paying $385K plus $15K in escrow and then not knowing how long it will take to buy out the other mortgages.

We feel bad and are making plans to leave so they can take possesion once they get everything. But it may take them many months and more money than it is worth to take possesion of the unit.

[mortimer]

Suppose you could just "snag" it now for $150k?

Suppose at auction, you could just "snag" it for $80k?

That would make me financially aroused.

Moving is a pain, but it's not that much of a pain to miss out on a deal.