Local water company is selling a property at auction soon. They are recovering 16K in water bills and attorney costs. It is a cash only sale. Zillow says it is worth 600K. Word on the street is it may sell for 100K or less, cash. There is a 2 year right of redemption. Looking at the liens on line it appears the mortgage owing could be around 900K. Taxes are current however.

Title insurance company says they would not sell a policy until the 2 years elapse. The water company filed a Les Pendens in January.

Here is the question: If a person buys the thing for 100K or whatever, how does this work out with the bank? Is the bank going to go after the buyer? Or would they just sell it for 500K or whatever they can get, then redeem it and give the buyer their money back? With the Les Pendens filed I don't know if a buyer can even aquire a clear title, so even though they "bought" it could the bank still sell it?

Thanks

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I'm no expert but I'm going to take a stab at this. If I remember right, a tax lien trumps or wipes out a bank mortgage. In other words, if someone doesn't pay their property taxes, the city or county can foreclose on the property and in the information I've read, wipes out the mortgage. The question is whether this same principal would apply to a water bill. I don't think a delinquent water bill foreclosure auction or sale would wipe out an underlying mortgage. Plus, the former owner has two years to redeem. sounds like a risky deal to me.

Why don't you call someone in city hall. It's probably not the first time the a process of this type has happened.

Rather than seeking generic opinions on the internet...or trusting some slug at Ciity Hall, go spend $150 and sit down with a knowledgeable real estate attorney for a half hour. Since his license is potentially on the line, he has an incentive to give you accurate information.

The issue is solely dependent upon the laws of the state of Washington and, particularly, how they treat the water district and its lien. In some states a water district maybe a private entity and would not necessarily have the same rights as a state tax lien. That said, tax liens do trump other liens against the property.

You also need to find out about statutory interest. In most states that accrues during the redemption period and must also be paid to the purchaser, and it's often a better investment than many. Either you get paid, with interest, or you end up with the property. In some cases it's really awful, though.

"Protect yourself" is the best advice I can offer. And yes, I used to practice real property law.

Good luck.

It depends on the laws, before plunking down $100k go sit down with a RE attorney.

I know in some states the mortgage company has the right to come back after the property once the tax or in this case water lien is cleared. In others they are SOL.

If the mortgage company does have $900k in it, you can bet they are going to do whatever they legally can to get some of that back.

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from my reading of the OP, the former owner has the right to redeem. So, if the owner coughs up the water bill plus $900K plus interest on the mortgage, he/she could redeem the property. If that were to happen, your $100K might be wiped out. Most likely, the chances of that happening are slim. On first blush, it appears that you "might" be able to obtain a nice piece of property for well under market value.

However, with the complexity of this deal, it might be a good idea to run it past two or three real estate professionals. Plus, an EXHAUSTIVE title search would be in order to uncover any other liens, levies, etc etc that might not be readily apparent. And, as Hatterasguy says and depending on the state, the bank may pursue the $900K through foreclosure proceedings as well as pursuing the original borrower. The fact that the title insurance company won't offer title insurance until the redemption period is over would give me pause.......

There is safety in many counselors.