Lien on property in foreclosure

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daggerboard
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Lien on property in foreclosure

Post by daggerboard » Sun Oct 15, 2017 12:50 pm

Hi,

I have a $10k lien on a property that was just foreclosed on by the city because the owner hasn't paid property taxes.

It will soon go to auction, and I am cautiously hopeful that the proceeds will exceed the taxes owed by $50-75k, but who knows.

I confidently assume the tax lien gets precedence over a private lien like mine. There is no mortgage or other lien senior to mine.

The city (in Wisconsin if that matters) that is foreclosing on the property has done a nice job in keeping me as lien holder informed of all activity including copies of all court paperwork etc etc.

Here is my question - as a lien holder, do I need to do anything proactive is this process? Do I just wait to see what happens at auction, and then if the proceeds exceed the tax debt, expect a check with my name on it from the city for my lien? Or do I need to engage a lawyer and file paperwork etc which could very quickly eat into my modest lien value?

I will be calling the city clerk w same question, but not sure how helpful they will be.

Tx!

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EddieGee
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Re: Lien on property in foreclosure

Post by EddieGee » Sun Oct 15, 2017 1:35 pm

I STRONGLY recommend that you at least consult with an attorney even though it will cost a few hundred bucks. Laws regarding tax liens vary widely from State to state. In Illinois, for example, a tax deed simply wipes out most other liens and the lienholder gets nothing. In any event, a tax lien is usually handled differently from an ordinary foreclosure. Once you know how it works in Wisconsin, you can decide what proactive steps, if any, you should take.

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dm200
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Re: Lien on property in foreclosure

Post by dm200 » Sun Oct 15, 2017 2:14 pm

daggerboard wrote:
Sun Oct 15, 2017 12:50 pm
Hi,
I have a $10k lien on a property that was just foreclosed on by the city because the owner hasn't paid property taxes.
It will soon go to auction, and I am cautiously hopeful that the proceeds will exceed the taxes owed by $50-75k, but who knows.
I confidently assume the tax lien gets precedence over a private lien like mine. There is no mortgage or other lien senior to mine.
The city (in Wisconsin if that matters) that is foreclosing on the property has done a nice job in keeping me as lien holder informed of all activity including copies of all court paperwork etc etc.
Here is my question - as a lien holder, do I need to do anything proactive is this process? Do I just wait to see what happens at auction, and then if the proceeds exceed the tax debt, expect a check with my name on it from the city for my lien? Or do I need to engage a lawyer and file paperwork etc which could very quickly eat into my modest lien value?
I will be calling the city clerk w same question, but not sure how helpful they will be.
Tx!
Yes or maybe ..

It all depends on the specific details, but (no experience personally, but have read/heard this frequently) in this kind of sale, the foreclosing entity have ZERO incentive to get the best price for the property - as long as they get paid. Such a sale may be done in a way that is fast/expedient vs best price. What some such lienholders do, when in a secondary position is make a bid on the property in order to try to get a sale at a better price. In some cases, such a secondary lienholder will actually purchase the property - satisfy the higher priority lien - then sell the property in a way that will get a better price.

I know, for example, that this is commonly done when a first mortgage lienholder forecloses on a home - and there is a second trust of Home equity lien. Keeping you "informed" (probably because the have to) is one thing - getting a sale price that is the "best" is yet another.

An experienced attorney in collections/foreclosure (in that jurisdiction) might be someone I would consult. Maybe bankruptcy attorneys might have knowledge as well. There might (not sure) be some mortgage/lending/real estate professionals that also might be of help.

I think such foreclosure sales like this are public record - so that might give you some information.

In my opinion, sitting back and waiting is about the worse thing you can do.

Carefreeap
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Re: Lien on property in foreclosure

Post by Carefreeap » Sun Oct 15, 2017 2:45 pm

Is there a reason you wouldn't bid on the house yourself at least up to the value of your lien? What do you estimate to be the value of the property? Have you seen it recently?

I understand 10k isn't that much and maybe it's cheaper to lose it than to take on the risk of certain property ownership.

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dm200
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Re: Lien on property in foreclosure

Post by dm200 » Sun Oct 15, 2017 2:50 pm

Carefreeap wrote:
Sun Oct 15, 2017 2:45 pm
Is there a reason you wouldn't bid on the house yourself at least up to the value of your lien? What do you estimate to be the value of the property? Have you seen it recently?
I understand 10k isn't that much and maybe it's cheaper to lose it than to take on the risk of certain property ownership.
Of course, if the real and actual "value" of the property was less, by bidding you could end up with an underwater house.

Carefreeap
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Re: Lien on property in foreclosure

Post by Carefreeap » Sun Oct 15, 2017 5:33 pm

dm200 wrote:
Sun Oct 15, 2017 2:50 pm
Carefreeap wrote:
Sun Oct 15, 2017 2:45 pm
Is there a reason you wouldn't bid on the house yourself at least up to the value of your lien? What do you estimate to be the value of the property? Have you seen it recently?
I understand 10k isn't that much and maybe it's cheaper to lose it than to take on the risk of certain property ownership.
Of course, if the real and actual "value" of the property was less, by bidding you could end up with an underwater house.
I would hope the OP would do his/her homework before bidding on the house.

daggerboard
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Re: Lien on property in foreclosure

Post by daggerboard » Sun Oct 15, 2017 7:29 pm

Thanks all.

I doubt I want to burden myself with the effort of bidding/buying for the sake of "saving" $10k.

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deanbrew
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Re: Lien on property in foreclosure

Post by deanbrew » Mon Oct 16, 2017 9:03 am

dm200 wrote:
Sun Oct 15, 2017 2:14 pm
What some such lienholders do, when in a secondary position is make a bid on the property in order to try to get a sale at a better price. In some cases, such a secondary lienholder will actually purchase the property - satisfy the higher priority lien - then sell the property in a way that will get a better price.

I know, for example, that this is commonly done when a first mortgage lienholder forecloses on a home - and there is a second trust of Home equity lien. Keeping you "informed" (probably because the have to) is one thing - getting a sale price that is the "best" is yet another.

An experienced attorney in collections/foreclosure (in that jurisdiction) might be someone I would consult. Maybe bankruptcy attorneys might have knowledge as well. There might (not sure) be some mortgage/lending/real estate professionals that also might be of help.
Yes, I see lots of tax sales where the mortgage holder bids and buys the property if the other bids aren't high enough to pay off the tax lien and mortgage lien. Is it a gamble? Sure. How much of a gamble depends on what the value of the property is and how much time and expense will be involved in selling it.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

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deanbrew
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Re: Lien on property in foreclosure

Post by deanbrew » Mon Oct 16, 2017 9:51 am

It will soon go to auction, and I am cautiously hopeful that the proceeds will exceed the taxes owed by $50-75k, but who knows.
I doubt I want to burden myself with the effort of bidding/buying for the sake of "saving" $10k.
These two statements seem to be contradictory. If it's worth $50-75k, why wouldn't you bid at least $10k on it? :?:
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

vaught
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Re: Lien on property in foreclosure

Post by vaught » Mon Oct 16, 2017 10:03 am

Talk to an attorney.

I can't definitively tell if the property was truly foreclosed upon or if the city is selling at a tax sale. You state that the city has already foreclosed on the property and is now putting it up for auction.

Admittedly I don't know the procedure in Wisconsin but that seems a little contradictory to me.

Generally when a city is owed unpaid property taxes they sell it at auction and people "buy" it. Most people buy these properties for the amount of the taxes owed for the lucrative interest rate that they get in the interim until the actual property owner "redeems" their interest by paying off the property taxes. If not redeemed after a certain time period then and only then the purchaser at the tax sale becomes titleholder.

You mentioned that you are second title holder. Who is the first titleholder? The City? When was their lien recorded in relation to yours? If it was truly a foreclosure the priority lienholder's foreclosure generally wipes out any secondary liens. If it is just a tax sale that is not the case though.

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