trustee sale - Need Advise

Started by DavidH22 • 11 replies • 1520 views

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DavidH22 (Maryland)
Posts: 2

Posted:

I recently was the high bidder at a Trustee sale in Maryland and am waiting on ratification of the sale by the court. My high bid was only $10,000 but it includes the assumption of liens by the primary lender, a second lender and federal tax liens. All of the outstanding liens total around $950,000 and the condo is only worth about $250,000. At this point i have only paid a $5,000 deposit and would need to pay the remaining $5,000 balance within 10 days after ratification of the sale by the court. My understanding is that once the sale is ratified I have complete rights to the use of the condo but will need to start paying condo fees and taxes from the trustee sale date forward and will be able to negotiate with the banks/lien holders to settle the outstanding debts like a short sale. If I can not settle the debts for a reasonable amount then I am only at risk for the $10,000 that I have into it. Does anyone have any advice on how I should proceed on this or should I get out now and only loss the $5,000 deposit? Any advise would be appreciated.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I would get out now. This is the risk you take by buying one of these properties. I did a foreclosure sale on a house in my HOA. You are on the other side of that now. Basically, you bought the house for 10K but you have to assume whatever else the house mortgage/tax lien. You may or may not have to pay off the HOA lien. I'd consult a lawyer on that.

You would have made out great if the owner of the home had only 20K left on a 100K mortgage. You would be out 30K and have a house worth 100K range. Which is the best case scenario in these kind of cases. However, in your case this owner had a large amount of debt. The property you bought is most likely not worth the debt load carried on it. Could you sell it for the 250K?

There may be a right of redemption in some states. The owner could come back to purchase the property plus improvements up to a year after the sell. Meaning you will have to hold onto this property for atleast a year. This means you have to pay the HOA dues as long as you own the place.

You may get out of some of the debt load as some of it seems on the owner's head and not yours. I would say the mortgage and back taxes may fall onto your lap. However, the liens may fall onto the former owners. It should be in his name for those debts. They are selling the property to make up on some of that debt. A good lawyer would be good to have to sort things out.

Former HOA President

MatthewW4 (Arizona)
Posts: 500

Posted:

David,

My understanding of trustee's sales is that the court or sheriff or other official issues a deed to the winning bidder and that the deed is then clear of all liens and encumberances. But I have never participated in a trustee's sale so I do not know the ins and outs of what really happens.

If I understand correctly, your winning bid will result in you obtaining title to a $250,000 condo with almost a million dollars in liens attached to it.

If I were in your position I would start by asking some questions. Among them would be: Since there are people who buy foreclosed homes for a living, why did none of them top your $10,000 bid? What do they know that you don't?

My best advice would be to petition the court to disapprove of the sale so you can get your deposit back. If that fails, then just walk away and take the $5000 hit and count your blessings.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

DITTO

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Or.............

Go through with the sale, rent it for $2,000 month, and make your money back in 5 months ($10k). Anything after that 5 months is pure profit. Don't pay the bank anything, wait for them to foreclose. Pay the HOA dues as you go. Only pay the minimum amount taxes when the town is getting ready to foreclose. You could rent this out for 3 years easily. You own it.

This is a business decision, don't crap on me about being ethical or moral. He can make this deal work without loosing any money.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

and will be able to negotiate with the banks/lien holders to settle the outstanding debts like a short sale.

Pretty much no chance of that happening. Your best bet is to rent it for as long as you can until the bank takes it away (forecloses).

MatthewW4 (Arizona)
Posts: 500

Posted:

Quote:

Posted By SteveM9 on 05/20/2013 10:35 AM
Or.............

Go through with the sale, rent it for $2,000 month, and make your money back in 5 months ($10k). Anything after that 5 months is pure profit. Don't pay the bank anything, wait for them to foreclose. Pay the HOA dues as you go. Only pay the minimum amount taxes when the town is getting ready to foreclose. You could rent this out for 3 years easily. You own it.

This is a business decision, don't crap on me about being ethical or moral. He can make this deal work without loosing any money.

Not bad advise, either.

Don't get too emotionally attached to the condo and make whatever you can from it before losing it to the lienholders. This assumes that the unit is in move-in-ready condition and not totally trashed inside as many are. If you have not yet seen the inside of this place you should do so before plunking down the other 5 grand.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What about the hit to your credit? A foreclosure or having a lien filed against you can damage your credit. So I would be careful about taking advice on letting that part of the process happen...

Former HOA President

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

He is paying cash so he can easily take title/deed under an LLC, corporation, foreign company etc. His name doesn't have to be involved at all.

DavidH22 (Maryland)
Posts: 2

Posted:

The sale will be done under an LLc that only has one other asset ( A parking space in the same building). If the LLC completes the purchase will there be any residual risk of loss to the assets in the LLC or will I only be at risk for the cash paid out ( ie $10k plus the normal condo fees and taxes after the sale is approved by the court?

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Really depends on how you setup the company. If you don't know how, a lawyer can help. Basically if setup correctly, the LLC will have no assets (besides what you mentioned) and thus nothing to win in a lawsuit.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Paying cash for a house can effect your tax filings. Can not claim many of the tax breaks of owning a home if cash paid for straight out. So be careful of the tax ramifications. The dues could be tax deductible for you if you use the property as rental. They are NOT if you own the home otherwise. You also lose some of the deductions for repairs.

Not a big fan of the LLC. It works somewhat but not completely immune to liens, foreclosures, or lawsuits.

Former HOA President

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