Foreclosure in San Francisco>Question Details

Jo, Home Buyer in San Francisco, CA

If a property is foreclosed and auctioned by the second mortgage, does a new buyer who buys this property at

Asked by Jo, San Francisco, CA Sun Mar 1, 2009

auction need to continue the payment of the first mortgage or the new buyer need to pay off the first mortgage right away (at the transaction of the auction)?

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Jed Lane’s answer
Buying the property by assuming the second is risky. The second can be wiped out if the first forecloses. Check with an attorney, but it would seem to me that all you are buying when the second is auctioned is the note. If the borrower defaults on the first you could be in position to pay the first and then have title ot the property after you foreclose on the borrower.
So you get no title, only a note with a recoded lein when you buy the second and the first can wipe you out. If you proceed get a steep discount and be prepared to litigate.
1 vote Thank Flag Link Sun Mar 1, 2009
Jed Lane, Real Estate Pro in San Francisco, CA
I agree with Jed if what you are buying is the loan secured by the second deed of trust.

But as I read your question, it sounds more like the holder of a loan secured by a second deed of trust has already foreclosed on the property and that you are buying title to the property from that lender. In that case, you will acquire title subject to the first deed of trust. If you don't want the first deed of trust to foreclose on the property, you will have to make the payments on the loan.

The risk you have in buying in this situation is that you may not know the terms of the loan secured by the first deed of trust. The first loan may have a due upon transfer clause. That loan may be coming due or have an escalation in the interest in the near future. If this turned out to be the case, you would have to be prepared to refinance the existing first loan.

Jeffery P. Woo, Esq.
Sedgwick, Detert, Moran & Arnold, LLP
Complex Rental Property Group
0 votes Thank Flag Link Thu Mar 5, 2009
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