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Here's my situation. I recently placed a bid on a short sale (condo) and the seller accepted the bid. It's now in the process of being considered by the bank. However I just found out that the Condo Association through their lawyers just foreclosed on the condo and now an auction date has been set for one month from now. I'm trying to work with my agent on here but I wanted to get some objective advice. In particular, let's say the auction actually happens (does not get cancelled) and at the time the auction takes place, I still have a live or pending bid on the short sale that was not approved yet by the bank. My questions are:
1) can I go to the auction myself and bid on the condo even though I have a bid in with the bank on a short sale?
2) if yes, should I expect the bank will be there and actually bid themselves, maybe up to the value of the current bid I have with them?
3) would it be in my best interest to back out of my short sale bid prior to the auction and then I can go to the auction and bid on the condo free and clear?
I just don't know what to do if the auction takes place and I currently have a pending bid on the condo via a short sale with the bank? Remember the bank didn't foreclose on it, the Condo Association did. Help!
Here's my situation. I recently placed a bid on a short sale (condo) and the seller accepted the bid. It's now in the process of being considered by the bank. However I just found out that the Condo Association through their lawyers just foreclosed on the condo and now an auction date has been set for one month from now. I'm trying to work with my agent on here but I wanted to get some objective advice. In particular, let's say the auction actually happens (does not get cancelled) and at the time the auction takes place, I still have a live or pending bid on the short sale that was not approved yet by the bank. My questions are:
1) can I go to the auction myself and bid on the condo even though I have a bid in with the bank on a short sale?
2) if yes, should I expect the bank will be there and actually bid themselves, maybe up to the value of the current bid I have with them?
3) would it be in my best interest to back out of my short sale bid prior to the auction and then I can go to the auction and bid on the condo free and clear?
I just don't know what to do if the auction takes place and I currently have a pending bid on the condo via a short sale with the bank? Remember the bank didn't foreclose on it, the Condo Association did. Help!
You keep saying that the condo association "foreclosed" (past tense). But a foreclosure usually takes place via an auction, which you said hasn't happened yet. A foreclosure also indicates a change in ownership (meaning the seller doesn't own the house anymore, meaning your contract would already be void). I assume what you actually mean is that they have served a forclosure notice, and are going to foreclose (future tense) in a month. So check on that first. If the association owns the property now, your contract with the seller is over, since they are no longer the seller.
If the condo association is the one foreclosing, they are probably foreclosing on a junior lien, so buying the lien at that auction very possibly does NOT buy the property, but only the right to collect on that junior lien. However, it also could mean that the condo has enough equity (if any seconds are dropped) that the HOA is buying out the first lien for full possession, and that is up for auction. I'm not completely sure how that works. If the HOA forecloses, buys out the first, the second may go away, leaving the property with some equity. Definitely check on that next.
If it is actually a foreclosure on the primary lien, then the answers are
1. Yes, you can. Also, in most auction cases, you have to be prepared to pay cash at the time of sale, rather than being allowed to arrange for financing. Some auctions do allow for financing, but check into that beforehand.
2. Maybe. I've seen auctions go for a fraction of the current loan value, (we've bought some before for as little as around 1/4 of the current loan value) and I've seen the opening bidding start for OVER the current loan value (because they add in all the legal fees, late fees, etc).
3. There is no need to back out first. If the condo sells at auction, to you, they bank, or anyone else, the short sale contract is void.
Thank you so much for the answers. Yes you are correct it's in the process of foreclosure with an auction date established. Also I am hearing now from the agent that works with the bank that the Condo Association can't foreclose on this because the bank has the lien. Maybe this applies to what you talked about with Junior and Primary liens because otherwise I'm not sure how the Condo Association could get to this point in the foreclosure process (having an auction date established) if they didn't have some kind of lien on it. In any case, the agent is supposedly working now to get the auction cancelled. Here is the exact quote I got:
'They cannot foreclose when they are not the lien holder. End of story. Send me phone and fax numbers and I will take
care of this ASAP.'
What helped me the most is your answer to my #3 -> that I can still go to the auction and bid and if accepted, it voids the Short Sale bid I have. The only thing I wondered is if I still had the bid active, would the bank be inclined to bid up to that amount (since they have me with that submitted bid) or if I backed out, maybe the bid would start and stop lower than the bid I have with the bank. In other words the bank might not be willing to bid as high because I no longer have that bid in with them and maybe, just maybe I could get it lower.
'I have informed the bank's legal dept. that the condo association is trying to FC and we are filing a motion to dismiss based on the fact that they have no grounds as they are not the lien holder and cannot obtain clear title.'
LACERTA - turns out you were right again. Just talked to the Condo Association. They indeed have a junior lien that they would be foreclosing on and it can happen. However as you noted, I would not want to go and bid on this because I would not be bidding to own the property. I don't know if the bank would come to the auction and bid a penny over the Condo's price and take it over to own it free and clear. I understand if they don't and the condo ass. retains it, they can then rent it out to try to recoup some money (but not sell it as they don't own the propertly outright). This has been a real learning experience and it'll probably still be a fluid sitauation but I am learning a lot. Thanks again for all your insight.
What helped me the most is your answer to my #3 -> that I can still go to the auction and bid and if accepted, it voids the Short Sale bid I have. The only thing I wondered is if I still had the bid active, would the bank be inclined to bid up to that amount (since they have me with that submitted bid) or if I backed out, maybe the bid would start and stop lower than the bid I have with the bank. In other words the bank might not be willing to bid as high because I no longer have that bid in with them and maybe, just maybe I could get it lower.
There is a slight possibility that could happen. In most cases, though, the short sale department and foreclosure department operate as if they other didn't exist. The only interaction I have seen is that when a short sale offer is in place, often the foreclosure date gets postponed while they try to reach terms with the short sale. So if you WANT the foreclosure to take place, you could withdraw your offer, hoping they don't have a backup offer waiting in the wings, to try to force the sale to take place as scheduled, rather than postponing it.
If the bank is a very small, local one, they could have more interaction between the departments, but for banks like BofA, Wells Fargo, Chase, etc, the right hand very much does not know what the left hand is doing.
But yeah, from the rest of what you've said, it sounds like they possibly do have A lien, like for the amount of the past due HOA dues, but it is not the primary lien, so you could just be buying at the auction is a debt, with the right to collect, but no rights to the property itself. HOWEVER, it is also possible that you would be buying the house itself, but with any other liens still intact, and now your own responsibility. So, you pay $3000 for the HOA dues at the auction, but then also have to pay off the prior owners other liens in order to actually own the house, which is bad, since it was a short sale in the first place, now you owe more (possibly much more) than the house is worth. Or, you pay $100k, thinking you are outbidding the bank, and then STILL have to pay off the mortgage (really bad). I've never actually been to the auction of a junior lien holder, so I'm not 100% sure how they work, or if they are all the same. You would definitely want to do some substantial research before going that route.
LACERTA - turns out you were right again. Just talked to the Condo Association. They indeed have a junior lien that they would be foreclosing on and it can happen. However as you noted, I would not want to go and bid on this because I would not be bidding to own the property. I don't know if the bank would come to the auction and bid a penny over the Condo's price and take it over to own it free and clear. I understand if they don't and the condo ass. retains it, they can then rent it out to try to recoup some money (but not sell it as they don't own the propertly outright). This has been a real learning experience and it'll probably still be a fluid sitauation but I am learning a lot. Thanks again for all your insight.
Yeah, a HOA who actually forecloses (and doesn't just sell their debt) on a house with a mortgage for more than the property is worth, is not a smart HOA. They have to keep paying the mortgage, and can only sell if they cough up the cash for the balance. That is a good way for a HOA to go bankrupt, or to have the other homeowners stage a revolution. For the same reason, you wouldn't want to buy it, since you would have the same problems.
You nailed it again. The Condo Association's lien is for the back HOA payments and associated interest and lawyer fees which at this point totals roughly 12k. That will be the price at auction. I'm told it's standard in Florida that a bank will only pay up to 12 months of back HOA fees so I highly doubt the bank would step in and buy this at auction since they feel they only have to pay 4k (1 year's worth).
I'm with you in that I do not want to bid on this whether I'm only bidding on the debt from the junior lien or outright property with other liens on it. Again I'm told that if the Condo Ass. ends up taking it because of no bids, then the bank has the right to foreclose on the Condo ass. so I certainly would want to own the debt or whatever at that point if the bank can then foreclose on me!
To your last point, I understand it's a big risk for the HOA to foreclose. If they do and can rent it out and recoup money, that's great and have been successful with a couple units as of late. However I remember about 3 years ago they took over a unit (I assume in this fashion), started to pump a couple grand in it to fix it up and try to rent it out, then suddenly it sold and the HOA lost all the money they put into it up to that point. When other tenants found out, there were not happy to say the least.
I definitely prefer the auction stop and the Short Sale goes forward. We'll see if they are successful in stopping the auction and getting the Short Sale done. It's like a soap opera at this point
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