2nd position lienholder's trustee sales


#1

I’m new to this whole thing, and am not sure what happens when a lien holder who is in 2nd position forecloses on a lien and brings that lien to a trustee sale/auction. I know that if a lien holder in senior position forecloses on a home, the junior liens are wiped out when you purchase the home at auction. But if you are the winning bidder on a property that was being foreclosed by the second position lien holder, did you only just win the right to give that lien holder some money? Or do you get the property even though there is a senior lien in place? And then would you just assume the payments on that first lien, or would you have to pay off that first lien in full within a certain amount of time? Also, if the second lien is for a significant amount of money (the first is too), why would the starting bid be so low?
Thanks!


#2

Hi Lisa,
If you purchased a 2nd at trustee sale you would be the new owner of the property but you would still be responsible for paying off any senior liens or loans. The holder of the first would not be obligated to accept payments from you. They could foreclose on their lien position and wipe you out if you do not payoff that senior lien.
The lender on the 2nd could substantially discount their opening bid from what is owed on the 2nd. They may do this to make it more attractive to an investor. If a 2nd forecloses they would also be responsible for the payoff on the first.