Foreclosure and Unpaid Debt on the Mortgage

[Humusluvr]

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

Hello All!

Here is the question my boss asked me, and I thought I would ask you, Oh wise ones.

"I found out that the taxes are current, but I don’t know if the buyer would be responsible for the unpaid debt on the mortgage. I talked to the realtor who was showing the house when it was on the market and she said that Yes, the buyer would be responsible (see the quote from the rules of the court in my question below).



So, let’s say this house auctions for $100,000 – the starting bid (no way in heck, but let’s say). If the outstanding debt is $200,000, the buyer really is going to pay $200,000, not $100,000. Not such a great deal if that is the case, which I think it is. I would really appreciate an answer to this, so if you could help me find out, that would be great!!"

 

[nextwife]

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

Hello All!

Here is the question my boss asked me, and I thought I would ask you, Oh wise ones.

"I found out that the taxes are current, but I don’t know if the buyer would be responsible for the unpaid debt on the mortgage. I talked to the realtor who was showing the house when it was on the market and she said that Yes, the buyer would be responsible (see the quote from the rules of the court in my question below).


So, let’s say this house auctions for $100,000 – the starting bid (no way in heck, but let’s say). If the outstanding debt is $200,000, the buyer really is going to pay $200,000, not $100,000. Not such a great deal if that is the case, which I think it is. I would really appreciate an answer to this, so if you could help me find out, that would be great!!"

Who is auctioning it?
Is this pre or post FC?
Was there one or two loans?
If so, was the other mtg named in the FC action?

 

[Ohiogal]

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

Hello All!

Here is the question my boss asked me, and I thought I would ask you, Oh wise ones.

"I found out that the taxes are current, but I don’t know if the buyer would be responsible for the unpaid debt on the mortgage. I talked to the realtor who was showing the house when it was on the market and she said that Yes, the buyer would be responsible (see the quote from the rules of the court in my question below).



So, let’s say this house auctions for $100,000 – the starting bid (no way in heck, but let’s say). If the outstanding debt is $200,000, the buyer really is going to pay $200,000, not $100,000. Not such a great deal if that is the case, which I think it is. I would really appreciate an answer to this, so if you could help me find out, that would be great!!"

The people who signed for the mortgage on the house that is not paid off would be responsible for the debt. As in -- those who were foreclosed upon.

 

[Humusluvr]

Who is auctioning it?
Is this pre or post FC?
Was there one or two loans?
If so, was the other mtg named in the FC action?

It is being auctioned in a Sheriff's sale.

I believe it is pre FC.

One loan for $200K, house starts bidding at $100K. If she gets it for $100K, what happens to the rest of the loan for the original owner?

 

[Humusluvr]

The people who signed for the mortgage on the house that is not paid off would be responsible for the debt. As in -- those who were foreclosed upon.

That is what would seem to make sense to me, too. Here is the info she got in an email -

My Boss -

I wonder if you know that answer to this. From the RealtyTrac.com site, I could see that the total debt owed is more than the market value of the house (see attached sheet). Does this mean that the buyer would have to pay off the unpaid debt of the previous owner if the purchase price does not cover the cost of the debt? That does not seem right, but from the language below, it seems to be the case.



“The Sheriff’s Office does not know the conditions of the titles. All buyers should be advised that all liens and mortgages not resolved by the sale monies of each property are the responsibility of the buyer. Research should be conducted through the Clerk of Courts File Room to ascertain the liens, County Fiscal Office for amount of taxes that are due, and Federal Court for federal liens that are pending.”

Real Estate Agent's Answer

I would follow those court instructions. Generally the way it works is the last mortgage holder buys the house back in order to take the"loss" then puts it back on the market generally with a Realtor. Things are different now with so many foreclosures. The mortgage holder(the one who brought the sheriff sale) may just bid up the price to try & cover their loss & let someone else buy it. Do as much homework as you can, get your financing in order then go to the sale. It will be a good experience to see how it all works. I believe that Federal liens DO NOT vanish with a sheriff sale.

 

[nextwife]

Is this the Sheriff's Sale? Or a presale action? The answers depend on what sort of auction this is.

Ohiogal knows Ohio law way better than I.

But at Sheriff's Sale, the named defendents get wiped off the REAL ESTATE through the foreclosure. While the foreclosed individual would still owe his creditors any unpaid balances (subject to other issues such as whether there was a bankruptcy, or whether the FC allowed for a deficiency), the REAL ESTATE would be transferred to the high bidder, free of the liens that would be eliminated in a foreclosure. Unpaid Real Estate taxes against the foreclosed property, for example, would still be owed by any third party bidder at Sheriff's Sale.

The wise SS bidders get their title company contacts to run a preliminary title commitment before they go to sale, so they know what would and would not remain against the real estate after sheriff's sale.

 

[Humusluvr]

Is this the Sheriff's Sale? Or a presale action? The answers depend on what sort of auction this is.

Ohiogal knows Ohio law way better than I.

But at Sheriff's Sale, the named defendents get wiped off the REAL ESTATE through the foreclosure. While the foreclosed individual would still owe his creditors any unpaid balances (subject to other issues such as whether there was a bankruptcy, or whether the FC allowed for a deficiency), the REAL ESTATE would be transferred to the high bidder, free of the liens that would be eliminated in a foreclosure. Unpaid Real Estate taxes against the foreclosed property, for example, would still be owed by any third party bidder at Sheriff's Sale.

The wise SS bidders get their title company contacts to run a preliminary title commitment before they go to sale, so they know what would and would not remain against the real estate after sheriff's sale.

Thanks guys! The stuff you said makes sense. I appreciate your help