Legal Question in Real Estate Law in Pennsylvania

I am interested in a property that may come to a sheriff's sale. The property is owned by an LLC. The first mortgage is held by an individual (who bought it from a bank). His mortgage has a value of about $250K. The 2nd mortgage holder is the county development office, who lent about $200K. Then follows and attorney $7K. The fourth mortgage is held by the 1st mortgage holder, for $130K. There are $36K of tax arrears. If I buy the property for, say, $350K, in what order are the creditors paid? Also, what happens to the liabilities of the LLC? It is a B&B and may have taken deposits from future guest. Thanks.


Asked on 6/02/10, 5:04 pm

1 Answer from Attorneys

Miriam Jacobson Retired from practice of law

Sheriff's Sale, in most counties, is an auction. Depending on which mortgage or other lien is being foreclosed, the holder of that lien will not allow the property to go for less than is necessary to pay off its liens. The other mortgages with a higher priority than the foreclosing lienor will not be eliminated, so the property will still be subject to the higher priority mortgages.

You would have to bid based on the amount that the foreclosing lienor is owed, which would include the debt, plus all costs, outstanding taxes, and the sheriff's own charges for the sale.

There may also be other liens against the property.

Again, depending on who the foreclosing lienor is, there may be a right of redemption, meaning that the current owner might be able to redeem, or buy back, the property.

If you want to go forward with such a purchase, you should have a lawyer who has experience with representing buyers at sheriff's sales. You would also want title insurance, so that if you are the successful bidder, your title will be insured.

This response is not legal advice, since I do not have all of the information that would be required, and I do not have a representation agreement with you.

* If the answers to your question confirm that you have a valid issue or worthwhile claim, your next step should almost always be to establish a dialog with a lawyer who can provide specific advice to you. Contact a lawyer in your county or township.

* Another reason for contacting a lawyer is that it is often impossible to give a good answer in the Internet Q&A format without having more information. The unique circumstances of your situation and things that you may not have thought to mention in your question may completely change the answer. If you want to be sure that you have a complete answer to your question and an understanding of what that answer means, establish a connection with a lawyer who practices in the area of your concern.

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Answered on 6/02/10, 8:47 pm


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