Hiya wrappack,

Michael is pretty much right, but I thought I’d give you the sellup process in a nutshell, if that’s OK?

If the mortgagee defaults, the mortgagor may (after some legal paper shuffling) offer the proeprty for sale. The property has to be put up for public auction, and there will be a reserve which will usually be set by a valuer.

Once the reserve (which is always reasonable…) is reached, the property will be sold.

The moneys are disbursed thus:

Firstly, to the First Mortgage, in the amount of the mortgage, plus due interest, plus legal (and other) fees.

Secondly, Any other mortgages, in order, in the amount of those mortgages, plus their due interest, plus fees.

Thirdly, any other parties who may legally claim under the property.

Fourthly, the mortgagor. (IF there is any money left!)

So, for example, if the property has a first mortgage of 800k and a second mortgage of 200k, and sells at auction for 1.3m (lets suppose some 50k of work has been done by Mr Backhoe) then the money would be distributed thus:
First Mortgage, 800k + interest + costs (say 820k)
Second Mortgage, 200 + int + costs (say 210k)
Mr Backhoe, amound due + costs (say 55k)
TOTAL: 1.038k
So the Mortgagor will get: 262k to walk away with.

BUT

Say the auction only brings 950k…

First mortgagee gets 820k.
Second morgagee gets the balance (130k)
Mr Backhoe goes under. (no pun intended)
Mortgagor gets nothing.

I hope this is sorta clear. [blink]

Devgal