Help! trouble buying a house in forclosure!?

Question

In Mid-November I made an offer on a house. I at that time found out it was in forclosure. However, the homeowners were still living there and signed all the paperwork. I was told that the bank had to make all the decisions regarding this house and that it would be a while before I got any feedback on my offer. Finally in Mid January I was told they had made a counter offer(homeowners still signed the purchase agreement), and if I accepted it, the house was mine. I accepted immediately. I was to close Mid Feb (this fri) and yesterday...the title office tells my realtor that the forclosing bank was now "trying" to get the paperwork from the forclosing lawyer before it goes to the sheriff's sale. Also, it was now found that there is a second mortgage on the property that apparently no one knew about. My realtor says I have no rights in this, and that the bank is the one who has to sign the final paperwork at the closing. Any advice??

Answer 1

I think no matter what, you should contact a real estate attorney that has some experience in this. Realtors think they know how this works, but most do not, or the miss small critical details.

Do not kid yourself, this could get much worse than you expect. Do you know that the past owners might have 6 months to reclaim the house? Even after a foreclosure sale!
Or they could hire an attorney and if he/she can find a procedural error, which does happen, they could force the process to start all over.
Good luck

Answer 2

If the bank or lender signed the papers you should still have a deal. Who countered the offer? I'm concerned because you said the Seller signed the contract. In Foreclosure The Bank needs to approve that sale as well. In our State, the law states the seller can redeem their property up until the day of the sheriff sale. If the bank countered your offer and you accepted, there shouldn''t be an issue. This just might be a paper work hang up.
Didn't your real estate agent refer you to a good attorney with foreclosure experience..what are they saying?

The second mortgage does need to get addressed if you are buying this property before it gets foreclosed on. Second mortgage holders usually get screwed out of their money when the house actually gets foreclosed on. The first lien holder is the only one that usually ends up with any money. Thats why second mortgages charge a higher interst rate,.they are more of a risk for the lenders. But in your instance it seems that you negotiated a price and that price has to be sufficient funds to cover all lien holders as well as all foreclosure fees. If they owe more then your offer..find a good attorney that knows what a short sale is and offer both banks a short sale. The second mortgage holder usually settles for a LOT less because they know if it does go into foreclusre they get NOTHING. SO anything is better then nothing.

My advise...Find a GOOD attorney that can help you IMMEDIATELY!


Vicki Watzlawick
Broker Owner
Exit Platinum Realty

Answer 3

Well that's stupid what your realtor told you.

Lets see, it's going to the Sheriff's sale, so by virture of that the house is still owned by the folks living there. The bank has no say in this transaction unless of course, you're buying it for less than what the mortgage owed on the house. The bank will not be signing the paperwork at closing, the owners (who by the way is still living there) will sign.

Now you find out there's a second mortgage. If there truly is a second mortgage, my advice is to walk away from the deal unless you can get the second mortgage to take far less than what they also owe on the house.

El

Answer 4

Foreclosures are very sticky and complicated. There's not a lot you can do. If the bank signed the original P&S they are legally bound to it-- however once the closing date passes you have no legal contract. Most P&S are written so that if the seller defaults the buyer gets his earnest money back-- and that's it.

Try and keep it moving, but dont hold your breath.