I’ve been researching foreclosures and tax sales for a few years now and finally identified one I’d like to bid on. PropertRadar has been a HUGE help in identifying lien position and transactions history. I’ve been digging through the county recorders Grantor/Grantee index and have a few questions for you seasoned professionals:
The home appears to have been originally bought with cash at a short sale in 1999 and a deed was filed with the county. In 2005 they look out a “Cash out” loan for $65,000 from First Franklin, this is the one that is foreclosing. It is recorded as a “Deed of trust” with the county. The lien was eventually conveyed to Deutsche Bank, and they are the ones foreclosing on the original 2005 deed of trust. In 2007 there was a ELOC from Fremont bank that was taken and paid off. Later in 2008 there was a $100,000 ELOC loan from Fremont bank, that loan is also in default.
Even though the property was originally bought with cash, the first and oldest lien has the right to foreclose since the bank holds the “deed of trust”? The 2005 Cash out loan would be 1st and the HELOC 2nd would be wiped out after foreclosure, correct?
I called the two local title companies about getting title insurance but both said they don’t offer it for any foreclosure auctions. The property taxes are current (except 2024), there are no FTB or IRS liens. The home is vacant and the owners currently live and work a few hours away in a different part of the state.
I’ve thoroughly researched SB1079 and qualify as a prospective owner/occupant as we honestly plan to use the home as our primary residence.
Any insight around lien position would be greatly appreciated!
Hi Tyler, thanks for being a customer. With both loans in foreclosure it sounds like a property that is likely to sell. Note that most, and likely this one as well, postpone for at least a while, so be prepared for that. Many also cancel - the owner sells or figures out a solution. Overall it is a tough time to be in the foreclosure business in CA. Not trying to dissuade you, just want to make sure you have realistic expectations.
Purchase money loans are a bit different than cash-out loans in terms of wiping out prior liens at the time of the foreclosure sale; that is why we note the loan that occurred well after the sale was cash out. So long as that person didn’t have any liens prior to the cash out loan, this won’t be an issue.
Two loans foreclosing at the same time is tricky. Here are the two ways it can go:
The first loan is the first to foreclose. If you win the bid it will wipe out the second, and you get the rights of the first loan to take ownership of the property after foreclosure. As you correctly noted you will have to pay any past due property taxes or liens recorded prior to the first.
The second loan is the first to foreclose. You could bid on this if there is enough equity, but if you win, you will also have to pay off the first loan. If you don’t bid, or don’t win, there is a reasonable chance the successful winner will bring the first current or pay it off, and the first will never go to sale. If you do bid, you will want to be very careful to get a good estimate of the balance due on the first. If there is a notice of sale on the first, the published bid should be reasonably close.
Glad you qualify as a prospective owner/occupant, that definitely simplifies things, but note that it gives you two options:
Bid at the foreclosure auction. As a prospective owner/occupant you can’t be outbid after the auction, so this is a great approach.
Bid after the auction. Saves you the trouble of going to the auction, but unlike the auction this bidding is typically closed so figuring out what to bid is more difficult, and it may result in either overpaying or not getting the property.
Hope that all helps!
Thanks Sean so much for the detailed reply! It was very helpful and informative.
Yes, it looks like this property has went through a few cancelled trustee sales since 2017. After participating in the last few tax auctions, I know not to get our hopes up until it’s actually auctioned off. The auction for this property is scheduled for later this week and so things are looking good thus far!
It looks like there was a FTB lien when this mortgage was recorded, but the FTB lien was removed a couple weeks after.
I have a question around the post sale process. Since the house definitely appears vacant, and the husband and wife co owners both work and live in a different part of the state. Would I still serve them with a 3 day notice to quit? Do both of them need to be served since they are both listed as owners? I think the husband is an attorney so I want to make sure everything is done by the books. I’m budgeting in a significant amount of money for any potential post-sale lawsuits they may file.
I see a lot of information online about evicting owner or tenants but nothing around the process for vacant properties. The auctioneers website, that is hosting the in-person auction, also have listed as “believed” to be vacant.