[WSBARP] Condo Foreclosure Basics

[Patrick McDonald]

It completely depends on whether the association has lien priority over the deed of trust as provided in RCW 64.34.364(3), and if so, whether the lender appeared in the lawsuit and paid off the association’s lien priority. 

If the association does not have lien priority, then the lender would not have been named as a defendant in the lawsuit, and your client takes his or her interest subject to the deed of trust. If and when the lender forecloses, it will eliminate your client’s interest in the unit. The result is the same if the Association does have lien priority but the lender paid it off and was dismissed from the lawsuit. In either case, the lender does not have to avail itself of the redemption statute because its deed of trust is senior to the interest your client purchased at the sheriff’s sale.  

If the Association has lien priority, named the lender as a defendant in the lawsuit, and the lender did not satisfy the Association’s lien priority, then the lender would have to redeem from your client by paying off the amount bid plus interest and potentially some additional amounts as provided in RCW 6.23.020. The legislature changed the redemption statute to allow lenders to redeem in the wake of the Summerhill Village case in 2012. 

If the lender (or foreclosed owner) did not redeem, then your client would own the unit free and clear of their interests. 

This is somewhat of a big subject with a lot of variables at play, but those are the very basics. 

Patrick McDonald
________________________
Pody & McDonald, PLLC
1200 Fifth Avenue, Suite 1410
Seattle, WA 98101-3106
T: 206-467-1559
F: 206-467-4489



On May 1, 2015, at 10:00 AM, Jim Doran <jim at doranlegal.com> wrote:

> I have client that just bought a condo at a Sherriff’s sale for $15,000 which were the dues owed by the owner.  The underlying debt is with Bank of America for $120,000 but the property has a value of $70,000.  B of A did not show up at the sale. 
>  
> What happens?  Client gets the property subject to the Bank of America deed of trust, right? 
>  
> So, the deadbeat prior owner won’t pay, that’s for sure.  My client doesn’t want to pay $120,000 to B of A.  So I expect there will be a foreclosure by bank of America on the new owner.
>  
> What is the function of the “Redemption Rights” in the Bank?  Does the Bank have to buy the place back from my client for what she paid at the sale? 
>  
> A quick overview of how this works would be appreciated.  Just the framework.
>  
> Thanks,
>  
> James R. Doran
> Attorney at Law
> 100 E. Pine Street – Suite 205
> Bellingham, WA 98225
> (360)393-9506
> jim at doranlegal.com
> www.doranlegal.com
>  
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