Q: I am a realtor who has been contacted by an association to list and sell a property they have taken title to by foreclosure. The problem is that the property remains subject to a first mortgage and the former owner is nowhere to be found. I would like to simply contact the mortgage holder and sell the property since the association now has title. Can I do this?
A: You can contact the mortgage holder, but you will probably find that the mortgage holder will not discuss the loan with you and that you need the prior owner’s cooperation to complete this sale. When an association takes title by foreclosure of its lien, the first mortgage will survive that foreclosure. The reason that the association ended up with the title is because the property was not valuable enough for a third party to satisfy the first mortgage and the association at the foreclosure sale. Thus, the association gets the title by foreclosing its lien, “subject to ” the first mortgage lien. If you can get the prior owner to cooperate in a sale at this point, that would be ideal. It would be similar to a short sale, with the association conveying the property. However, it is been our experience that most banks are not helpful in this situation when the prior owner is not cooperating. The prior owner is the bank’s borrower, and the bank wants to deal with its borrower. I would suggest writing a letter to the prior owner offering a financial incentive to participate in the sale. If that does not work, I would recommend finding a tenant for the property if the association is willing to rent it.