Bought a 2nd?

[gryndor]

What is the name of your state (only U.S. law)? California

My parents just went to a property foreclosure auction this morning and bought a property for $25k. Turns out, this is a second on the property, with the primary being $162k. It appears that the primary is not in default at this time.

So what does that mean? Do they own the house? Does the holder of the primary own the house, and my parents have a modest interest in the property? We were told that if the primary forecloses, it "wipes out" the secondary, and in that event they have just lost $25k.

What are the next steps? Do we find out who holds the primary, and will they be likely to sell it to my parents? What if the person who took out the primary continues to pay and stay in good standing?

All in all, it seems like a crummy position to be in... it's an empty house that needs renovations and it seems like they need to sort out the primary before they can take possession... yes?

Thank you for any help/advice,
Gryn

 

[tranquility]

Your parents need an attorney to sort all this out and find out their correct position. A later lien can foreclose. There are a lot of issues from that holder's perspective so they don't always do so. But, they can. Buying on a foreclosed 2nd at an auction requires some level of sophistication. I don't think your parents had that. They need to get an attorney to explain everything and look over the paperwork and disclosures. They might very well have paid $25K and still be subject to the first. (That can now be called because the borrower lost his possession.)

 

[gryndor]

Mortgage Lender Follow Up

So I just got off the phone with the company that facilitated the trustees sale (that was hired by the lender to foreclose on the owner). That person told me that we are indeed the owners of the property, that she will be drafting a Trustees Deed and sending it out to us to record with the County. She said that at this point, since there was a primary lien, that we need to contact the primary lien holder (her client) and negotiate with them about how we take over the primary (continue making payments to them, redraft a new agreement in our names, get another loan to pay off this one, etc.).

But she said that we are most assuredly the owners of the property.

And that we are responsible for sorting out the first deed of trust. As in, we do not need to wait on the original person who took out this loan for anything.

And for the record, we are hiring an attorney to sort out the rest of this process... but until then:

Is this true in your experience?