I’ve got about 6k in outstanding invoices that I’m putting a mechanics lien on today. It appears that the bank might foreclose on this new home (90% complete) because the builder has squandered the money and they might go over the contracted price of sale just to finish. They need 100k to finish and have 13k left on bank draws. If they foreclose who satisfies the liens or do I get pennies on the dollar or just screwed? Do they auction it off to satisfy the liens? It’s in New York state. Any info would be good. They best thing that I can see is that the house is going for 350k, the bank financed 225k, but is probaly worth about 400k on the open market if the buyers are forced out of their contract.
Edited 10/27/2003 7:26:25 AM ET by jack straw
Replies
Most likely you will get zip.
You have enough money in this to spend the $50-$150 for a consult with a local attorney to get the exact details and what all options that you have.
But in general, for a foreclosure the property is "publically" advertised (often in legal publication) and auctioned on the "court house steps".
The property is sold to the highest bidder. The sales money is used to pay off the first leinholder. If any money is left then the next leinhold is paid off, then the 3rd, etc until the money runs out. The order of the liens is the order in which they are filled.
Bidding will start with the first lien hold bidding the amount that they are owed. Most times the bidding stops there so there is no money left for anyone else.
In cases where someone has lived in the house for a long time and paid down the 1st and then gotten a 2nd mortgage the 2nd lienhold might bid it up to protect them selfs. For example the house is worth $250k, and has $100k first and $75k 2nd the 2nd lienhold might bid $175k. But that means that he would have to have $100k in cash.
But I doubt that you have such a case here.
And you have an unfinished house. Probably with unknow plans and conditions. The only persons that would want to bild on this would be someone that is familar with the job and could kept it moving.
I don't know what you have done in the house and if your part is 100% is done. But if there is any more to do and if it might require some warranty work or touchups or reworking for changes is to kept in touch with who ever ends up with the job. Then work the best deal that you can from them.
You should also check with the attorney if you can go after the builder himself.
Bidding will start with the first lien hold bidding the amount that they are owed. Most times the bidding stops there so there is no money left for anyone else.
This confuses me. How does the first lien holder buying the property for what he is owed get them paid. Wouldn't he then have to re-sell the house?
Eric
The first lein holder then would own the property and can do what they want with it.
They will put it on the market. But they are not in the realestate management business or in the construction business.
In the case of an occupied house they general will just bring in a dumpster to clean out the junk and cut the grass. No repairs unless it is in such bad shape that they need to do something immediately like board up windows or tarp the roof.
Now that the bank owns it potential buyers will have opertunity to fully inspect it and investiage it. At the auction, in general, they don' thave that option and in many cases can only see it from the outside.
My first advise is to find a good lawyer. I have some questions, though. Who owns the land? Is it the homeowner? Bank? GC? Was there money held back from payments to the GC??
Around here, the homeowner is required to hold back 15% of any funds due to the contractor, under the terms of the mechanics liens act. The money is to be held until 60 or 90 days after closing, and then the money is released. If liens are filed, this money is to be used to satisfy the liens.
Depends on the state. Get a lawyer.
In California, if you file your Preliminary Notice, it will take priority over a subsequently filed Trust Deed or Mortgage. If it is a large job, you can file a Stop Notice which causes the lender to stop advancing funds and interplead or deposit the remaining money for later distribution to creditors.
Regards,
Boris
"Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1934
Bill you may be right. My understanding may be flawed.
I think the best advice given here was to talk to attorney.
My understanding is a lien clouds the title to the property and until that title is clean clear the title can not be transferred to some one else. Foreclosure is not the same thing as bankruptcy. Just because the property is foreclosed on dose not wipe out the det or a lien as I understand it. Bankruptcy dose.
Bankrupcy is for people. Foreclosures is for property.
Foreclosure does wipe all of the lessor liens on the property. Otherwise you would have lots of abandoned property setting around as the liens on the property is higher than the value.
My understanding is a lien clouds the title to the property
This is correct also, The title cannot be transferred by a sale until all the liens are satisfied.
But in this case, the bank can foreclose because they have the first lien. A foreclosure cancels all subsequent liens. You do have the right however, to out bid the bank at the foreclosure auction to protect your lien. You get out of life what you put into it......minus taxes.
Marv
I'm with Bill Hartman - Get an attoreney, and the sooner the better.
If they've got any money in the bank now, it will soon be gone. Sounds like this will end up in court if the builder has lost that much money.
Depending on who exactly hired you and cut the checks, you might still have a shot at getting paid. But you'd better move quick. Once it's in court it could be tied up for years, and you may never see a thing.
I may not be totally perfect, but parts of me are excellent. [Ashleigh Brilliant]
Jack
Just curious where in NY?
I am in Putnam County.
Eric
Hey firebird, the house is in Dutchess. I'm originally from Yorktown, moved to Wappingers and now am in Rifton. All my work now is new construction in Dutchess. Where you from?
I am in Brewster. Are you the guy who laways has an add in the Pennysaver for carpenters? Rifton is in Dutchess?
Anyway your situation sucks. That kinda $ hurt, now and for a long time. I'm still chewing $2400.00 from a coupla months ago. I'm a big believer in Karma Police and what goes around comes around. A wise man once told me the best thing you can do is out live them and piss on their grave!
I was just curious what you do and who you work for just in case I ever cross paths with you or the s-bag builder you are working for.
Eric
ya know a chain saw would...........nah, forget it.
Edited 10/27/2003 7:01:42 PM ET by firebird
Rifton is a small hamlet right outside Kingston. I just moved here in June and rent a 150 yr old Methodist church to live in until we can find a good piece of land at the right price. I do interior trim and kitchens. Depending on the job I'll do the hardwoods and decks too. I use to have a company in Westchester but now do all of the work myself, it keeps comp down and I don't deal with all the employee ####. The builders name is Gibian Inc. but as of today the finacial backer behind him is takng over the jobs under new management, there was a lot of finacial restructuring going on but it looks like everything might be ok. What do you do? There's so much work in the Westchester/Fairfield area but the commute is a bitch. My buddy runs a huge drywall company called Fiore Drywall, they're all over down there.
js,
I am glad that things may work out for you.
Livin in a church, that sounds cool. How did you come by that?
I do Residential Remodeling mostly in Westchester. I have lived up here for 15 years but my client base is largely south. Just me and my son at this time. Small and under control by choice. Lot's of kitchens and baths. Possibly limiting but it is mostly controllable. I here ya about having employees, I have chosen to limit my exposure to being an employer.
Eric
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