[Jay Chekansky]

Jay Chekansky

I sold a house with seller finance back in July 2020. The buyer is up to date on his payments, but recently had a judgement levied against him. The judgement is now recorded in the chain of title to the property and there is an execution sale of real property scheduled for later this month.

The UPB on my seller finance note is $43k. This is recorded in 1st lien position
The judgement and fees total $312k
The house is worth $180k

My question is – I don’t believe that anyone will be bidding on this property at auction due to the $360k of outstanding debts on a $150k asset.
Given my interest in 1st lien position, can I do the following:
1. Bid on the property subject to my first lien and the judgement
2. Take title to the property
3. Foreclose on myself due to lack of payments to the first lien that I hold
4. Take back the property as REO with the judgement wiped out in foreclosure (assuming that the judgement holder does not bid on the property)

[Bill Cook]

Bill Cook

Jay, each state’s foreclosure laws are unique. This is the first place to turn…learn your stat’s foreclosure laws. Also, I’m not an attorney or a CPA.

That said, in Georgia the 2nd would be foreclosing subject to the first. If you discover the borrower on 1st position mortgage or security deed is in default (not taking care of the property, not paying insurance or property taxes, not making timely, in-full payments, etc., you can foreclose. When you foreclose the second (property owner after they foreclose) is wiped out at your foreclosure.

In this matter I’d most definitely hire a real estate attorney in your state (the state where the property is) for a consult.

Hope this helps.

Bill Cook

[DON WEDE]

DON WEDE

Hi Jay,

Bill is correct get a attorney on this. My guess is that you will have to foreclose on your first position note and mortgage. There should be some sort of language in the security agreement that the mortgagor is in default by putting the the property in peril due to the judgment. Unless of course if the mortgagor is in default on other provisions in the mortgage.

Don Wede