[WSBARP] Foreclosure Fun!

[Paul Neumiller]

Thinking aloud here and need confirmation (or a slap down if needed).  Representing Creditor, I started a foreclosure action against Debtor.  Creditor accepted a Deed-in-Lieu in order to get possession quickly (and start repairing the property).  The DIL contains non-merger language so the lien of the deed of trust did not merge into the fee ownership of the property. Trustee Sale Guarantee discloses large liens against property.

So I am thinking through the ramifications if Creditor continues with the foreclosure action.  The benefit is eliminating the large liens.  The only risk that I have been able to identify (other than my additional atty fees and the time delay) is if someone tries to outbid Creditor at the foreclosure sale.  BUT, it seems to me that any excess money goes to the owner of the property so if someone successfully comes in with $1 million then Creditor gets the surplus funds as the owner (Good Result).  And, if Creditor wants to be the successful bidder at the foreclosure sale, Creditor could bid the price up even higher than $1 million because the surplus funds go back to Creditor anyway as owner of the property (again, Good Result).

I am missing something here?  I got the non-merger language blessed by the title company (and the underwriter) so I am fairly confident the non-merger language is effective.  The title company agrees with my analysis but I still have the fear of the unknown.  Is my analysis correct?  Are there other risks I need to consider in foreclosing on property already owned by the foreclosing lender?


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