Episode 26 Lien Priority

Episode 26 of a weekly podcast means we're half-way to one year's worth of episodes!  We appreciate the support of our listeners! In this episode, we answer a question from one of our listeners!  Our listener, Tyler, bought property at a foreclosure sale of a junior lien (second mortgage, condo association, etc.).  Now the first mortgage is foreclosing to take the house away from the investor.  What can our investor/buyer do to protect himself? Great question! Two answers: 1. Pay off the superior lien in full; or 2. Get the former homeowner's cooperation and negotiate a short pay off with the foreclosing lender. One other option is to rent the house for as long as possible to recoup as much of the investment as possible, until the bank finally forecloses and takes the house away. If this is a solution then notice must be given to the tenant so that they are not surprised by a subsequent foreclosure sale. The title of this podcast, "Lien Priority" comes from the system of determining which lien is first in line. What allows the first mortgage to foreclose even after the second mortgage or homeowner's association has foreclosed? Why can the second mortgage or other junior lien foreclose without naming the first mortgage in its foreclosure action?  Why do none of these include the County Property Tax Collector in their foreclosure actions?  The answer is based on the concept of lien priority. The great Benjamin Franklin is famous for saying, "An ounce of prevention is worth a pound of cure." That is likely the best advice in this situation in that foreclosure sales are "buyer beware."  Therefore, doing your due diligence BEFORE buying the property could prevent issues or losses like the one described by our listener. We appreciate the question and have more that we'll be answering in future podcasts, and on the blog (http://www.yesnerlaw.com/blog). Of course, we would enjoy answering more of our listener's questions, so please email those to [email protected].