Foreclosure in Phoenix>Question Details

Fha Ugh, Home Buyer in Phoenix, AZ

If you house if foreclosed on and put up to auction with a 1 mtg & 2nd and the bank owning the note bids higher than the 1st what happens?

Asked by Fha Ugh, Phoenix, AZ Mon Jan 28, 2013

so for example.
1st mtg = 80000
2nd = 60000
bank owning note bids $95,000 for some reason (which they did). what happens to the $15,000 extra as the 2nd mtg holder has sued me for the full 60,000 saying they never received anything from the auction as the bank owning the note did the bidding.

Help the community by answering this question:


This is not legal advice but common information for those who have bought foreclosures at the courthouse. You should go and meet with a real estate attorney who processes foreclosures for any legal advice.

Usually the 1st won't go higher than their judgement unless they are bidding to win the bid and take title. Any amount they bid over their judgement goes to pay taxes and then junior lien holders in the order of their position. If the 2nd received any funds it would reduce the debt.

You should be able to contact the Master In Equity Court and ask if the 2nd received any funds.
0 votes Thank Flag Link Fri Apr 4, 2014

I used to manage a trustee department for a major bank and the skinny on the additional funds is as such;

Once the 1st mortgage is paid off the balance of the funds will go to an attorney and then disbursed to the 2nd lien holder.

When did your home foreclose? Do you know if your mortgage had a "recourse" clause? Who were your lenders?

There were lenders that participated in the National Mortgage Settlement Act that does not allow the mortgagor to collect the unpaid balance from the homeowner. Call me if you'd like more information.

Best of Luck,

Lisa Markham
Envoy Mortgage, Ltd.
NMLS# 947738 / AZ# 0921717
0 votes Thank Flag Link Fri Apr 4, 2014
I would recommend that you contact an attorney with these questions.
0 votes Thank Flag Link Mon Jan 28, 2013
First it is very odd that the 1st position bank bid more than what was owed on the note. Are you sure it was owed only $80k?

And based on my understanding the proceeds from the auction go to pay for the auction costs, tax liens, the first position and then to the second position. If the second position bank did not receive any money from the auction it was probably because the amount was not enough to cover the other debt.

And to be honest, if you are being sued, I would advise you to talk with an attorney.

Good luck!

Jose Dias, REALTOR
(623) 418-5700
0 votes Thank Flag Link Mon Jan 28, 2013
I would highly suggest you consult a legal attorney to know what your rights are.

If the money on the 2nd was used for the sole purpose of the property that was foreclosed on and if this was your primary residence, there may be no taxes due on the difference.

I am not an attorney and would suggest you speak with one to know what your rights are and if in fact you do owe anything.

Did you initially attempt to short sale the property or just allow it to go to foreclosure? Did you try and work with the bank? These and other questions are ones that an attorney will want to know.

If you would like me to recommend a very good real estate attorney in the phoenix area, please contact me at 602-799-5239.

Debbie Nieman
Keller Williams Sonoran Living
0 votes Thank Flag Link Mon Jan 28, 2013
There are no extra $15,000. In addition to the $80,000 1st Mortagae you also owe them a lot in late fees, foreclusure fees, etc. All those fee were easily more than $15,000.

It looks like at the very least you will have to pay +$60,000.

You might have been better off just keeping the house!
0 votes Thank Flag Link Mon Jan 28, 2013
If you are being sued, you need an attorney to help you understand the situation and present the options. There are way too many variables that can be discussed in a public forum, both for your protection and the protection of the general public from mis-understanding the discussion. Please seek out the advise of several attorney's before picking one.
0 votes Thank Flag Link Mon Jan 28, 2013
In a trustee sale (the final event in a process called foreclosure) that sale wipes out all liens of record that existed prior to that. So the higherst bidder gets a property free and clear (so to speak there is a little more than that) and those home loans in your example of $140,000 owed are released from the property.

The second position note holder was not paid the full amount to release their lien. (Likely the $95,000 bid by the first position bank was their principal, interest owed and all of the related fees) Likely the second position note holder wasn't paid anything. So they have sued you. There are several strategies you can take depending on your financial position and how you owned that property. The best source for that would be a Real Estate attorney. Most consultations are free before they starts working. If you need a referal I would be happy to give you one from local source that is good.

Dave Jackson
Loan Officer/Real Estate Asset Planner
Financing Solutions for Arizona Real Estate since 1993
American Financial Lending, Inc.
20860 N. Tatum Blvd, Suite 160
Phoenix, AZ 85050-4277
602 277-3800 w
602 631-9788 f
602 524-2401 c
602 912-9438 h
BK # 0910057 NMLS LO ID # 284875
0 votes Thank Flag Link Mon Jan 28, 2013
Even though the 1st Lender bid $95,000. there is no money exchanged. The home will now be Lender owned and they will likely sell it for market value.
It does sound like you need to speak with a Real Estate attorney to find out your leagal options.
0 votes Thank Flag Link Mon Jan 28, 2013
This is a forum for real estate agents, lenders, appraisers, property managers, etc., not real estate attorneys which is who you really need to speak to. Also, the information is vague at best and no one would be able to give you a concrete answer based on the information you have provided, even a real estate attorney.

0 votes Thank Flag Link Mon Jan 28, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer