I made a newbie mistake, WORST possible, bought a 2nd! Advice please.
Like the title says, after months of research, I felt reasonably confident to buy my first foreclosure at an online county auction. I'm not an investor, this was for my family and I to live in.
I ended up paying full sticker for the 2nd thinking it was a 1st ($110K). The auction went that high because there were about 7-8 other bidders in it.
1st has a statement of claim of almost $700k for a house that just appraised for $420k. When my attorney contacted their attorney to pursue a cash offer, they wanted full settlement.
My attorney, who has been handling my business affairs for years, was aghast at what I did and said I should've just stuck to business rather than real estaate. needless to say, I became physically sick because of the stupidity of my actions.
Please, I'm not looking for bashing, just simple advice from the pros whether there is anyting I can do.
The 1st is in forclousre, house is vacant and I have title. My wife and I still want the house, but don't want to pay double the market value.
Thank you in advance.
I hope it worked out for him and didn't scare him out of REI. I have had my failures as well but it's not the end of the world.
@Andrew R. I kind of have the opposite reaction. This should scare the **** out of everyone. There are few places where you can lose $100k in 1 minute, aside from Vegas perhaps.
Don't try to play basketball in the NBA if this is your first time picking up a ball. Likewise, don't make investing your own cash at foreclosure auction your first experience with real estate investing.
You say "I hope it worked out for him", but given his circumstances it's hard to see how it could. The first mortgage holder has zero incentive to work with him. The second mortgage holder is ecstatic. He's the only person that loses. Caveat emptor.
true, it was a big rookie blunder. I guess I meant I hope he was able to recover from that disaster and do better next time.
Well since the OP has abandoned the thread I did about 10 minutes of research to see where this stands. I found the property and the OP still owns the house and recently just placed it in a trust in March so the OP is still actively doing something with it. The mailing address for the property is listed as the property address so it looks like he may have moved in.
The first filed foreclosure in 2013 and has done absolutely nothing on the case since then other than serve the summons, it's presently up for dismissal for lack of prosecution on 5/5/15. If that case does in fact get dismissed and the OP is living there then he may get his $110k worth by living there for free for years. It's a nice little 1,200 square foot waterfront house in St Pete beach on an inlet off of the inter coastal waterway. It's probably worth $500k+.
Since the OP is long gone, I'll bring this topic back a little. What exactly is ment when he says "bought a 2nd." Does that just mean two liens on the property? And what is the best/ most thorough way to check for hidden cost on a property?
"First in time is first in right" is a principle of property law going back to the common law. In the United States, generally the property recorder for a town or county maintains a database of liens against property. The first to create a mortgage/lien against a property is "first in right" for the title & possession of that property upon a default by the borrower.
So buying a second doesn't merely mean there are two liens. In this case, it means that there are two liens, and he bought the one that has an inferior claim on the property. So if the property used to be worth $200k, and there is a first mortgage for $150k and a second for $50k, and subsequently the property becomes worth only $100k, the first mortgage will end up owning the property, and the second will end up with nothing.
The best way to check for hidden costs on a property is at your property recorder/town clerk. Every state is different in the way they treat recorded versus unrecorded property interests. In states that partially or fully implement Torrens title systems (http://en.wikipedia.org/wiki/Torrens_title), the recorder is the indisputable master record of who owns which property. An interest in property created before another, but recorded after, is subordinate in priority despite being created first (therefore a notable exception to the first in time, first in right rule. In Torrens Title states, first in time refers to the person who RECORDS first, not whose lien was created first).
In other states without Torrens systems, it is possible for unrecorded land interests to be superior to those that have been recorded. This is why title insurance companies aren't big fans of Torrens title systems, because Torrens systems reduce the need for/value of title insurance.
Hal, thank you for the clarification, and response to my question.