What is the name of your state (only U.S. law)? CA
In the most succinct format possible, here is a summary of a transaction I am considering. It is regarding a commercial property.
• The building is owned by Joe Blow, a single man (borrower) and leased to Joe Blow, Inc. until 7/2017.
• Bank has 1st and 2nd notes on the property.
• Borrower defaulted on both.
• Bank moved to foreclose on the 2nd lien and auction the property.
• Joe Blow, Inc. filed Chapter 7 BK.
• BK court issued an automatic stay, forcing Bank to postpone the auction.
• Bank claims that Joe Blow, Inc does not own the property – but rather that Joe Blow, a single man, does. Therefore they should be allowed to foreclose/auction. They requested relief from stay.
• BK court disagreed and is gathering information to determine whether the BK estate (Joe Blow, Inc) has a claim to the building or not.
• Auction has been postponed.
• The next hearing regarding the BK case is on Dec 13.
Bank will sell both notes for a slight discount to get them off their books by year end.
Currently the two notes have following amounts due combined (they are roughly the half and half):
Principal $4,000,000
Accrued interest $150,000 [accruing daily]
Late charges $75,000
Legal expense $2,500
Fire insurance $5,000
Total = $4,232,500.
Bank will sell the notes for $4,000,000 with close prior to year-end.
Other liabilities include past due taxes of $250ksf.
There area 3 other loans on title totaling $1,000,000.
Market value of the property $7,000,000 (Appraisal done +/- 18 mo ago supports this value)
Questions:
1) What are the advantages of buying the notes vs just waiting and bidding on the property at the foreclosure auction?
2) If we bid at the courthouse steps, should we bid on the second mortgage or wait for the auction related to the first mortgage?
3) Why would the bank be foreclosing on the 2nd lien instead of the 1st lien?
4) Should I try and negotiate a bigger discount with the bank? Might they be willing - even though the property has a market value far above the debts.
5) could someone walk me through the steps of what might transpire in this situation?
Many thanks
In the most succinct format possible, here is a summary of a transaction I am considering. It is regarding a commercial property.
• The building is owned by Joe Blow, a single man (borrower) and leased to Joe Blow, Inc. until 7/2017.
• Bank has 1st and 2nd notes on the property.
• Borrower defaulted on both.
• Bank moved to foreclose on the 2nd lien and auction the property.
• Joe Blow, Inc. filed Chapter 7 BK.
• BK court issued an automatic stay, forcing Bank to postpone the auction.
• Bank claims that Joe Blow, Inc does not own the property – but rather that Joe Blow, a single man, does. Therefore they should be allowed to foreclose/auction. They requested relief from stay.
• BK court disagreed and is gathering information to determine whether the BK estate (Joe Blow, Inc) has a claim to the building or not.
• Auction has been postponed.
• The next hearing regarding the BK case is on Dec 13.
Bank will sell both notes for a slight discount to get them off their books by year end.
Currently the two notes have following amounts due combined (they are roughly the half and half):
Principal $4,000,000
Accrued interest $150,000 [accruing daily]
Late charges $75,000
Legal expense $2,500
Fire insurance $5,000
Total = $4,232,500.
Bank will sell the notes for $4,000,000 with close prior to year-end.
Other liabilities include past due taxes of $250ksf.
There area 3 other loans on title totaling $1,000,000.
Market value of the property $7,000,000 (Appraisal done +/- 18 mo ago supports this value)
Questions:
1) What are the advantages of buying the notes vs just waiting and bidding on the property at the foreclosure auction?
2) If we bid at the courthouse steps, should we bid on the second mortgage or wait for the auction related to the first mortgage?
3) Why would the bank be foreclosing on the 2nd lien instead of the 1st lien?
4) Should I try and negotiate a bigger discount with the bank? Might they be willing - even though the property has a market value far above the debts.
5) could someone walk me through the steps of what might transpire in this situation?
Many thanks
