2 types of foreclosure- Judicial, where they take you to court, and non- judicial, where they just tape papers to your door (and mail you eleventeen copies, by certified mail. About half of the states permit only judicial, other half you can do either, but most go non-judicial if possible.
General rules for both: Foreclosure of a given encumbrance wipes out everything "junior" to it- that is, those things filed later in time, but doesn't wipe out things "senior"- filed earlier. Generally, foreclosures are done by the most senior encumbrance, which is the first mortgage or deed of trust. So in your example, the liens and building violation fines would probably be wiped out.
Taxes are never wiped out- somebody has to pay them. Usually, they are paid by the bank that is foreclosing, prior to the sale, just so they don't slip through the cracks.
As far as how much it goes for, that's up the the bank, as to the low end, and once it gets beyond what they want to bid, then its a regular old auction. But in the great majority of foreclosures now, they are "upside down", like your example, and bank decides what they want to bid, they ask for another bid and hear only crickets, and bank ends up with it.
In your example, if it is a judicial sale, it will be conducted by the Sheriff, AFTER the matter has gone through court and the bank has obtained a Judgment. They'll get a judgment for the full amount owed to them, plus costs, fees, taxes, etc., etc. THEN the property will be sold by the Sheriff, to satisfy the Judgment. Bank can bid up to the amount of the judgment, but usually will only bid what it thinks the property can be resold for. If that results in less than the amount owed, bank will then have a deficiency judgment for the difference, and can still go after the debtor to collect the rest of the judgment.
Non-judicial sale will be conducted by a Trustee appointed by the lender (usually a lawyer, or a professional trustee company), on the courthouse steps. Rules are sort of the same- creditor can bid up to the amount it is owed, but can bid as little as it wants. Pretty much depends on the bank's circumstances- if they have a bunch of acquired property already, and their regulator is threatening to take away their birthdays if they acquire any more, they may let it go cheap if they can get anybody interested.
As an example, I had a client once who was taking care of his mother-in-law's affairs, because she had Altzheimers. She had loaned about $40,000 secured by an old commercial property, and it should have been worth that, but needed a roof and lots of fixing. He asked me to advertise it, show it (he lived 100 miles away), try real hard to generate some interest in it. I asked him what his bottom line was, and he would only reply "I'm flexible".
I did get someone interested, but he would only pay $18,000. I told my client, and he said that was fine- and I could even take less, if buyer got cold feet. I ended up getting the $18,000, and he was delighted. I was curious why he didn't bid it in himself, put a little money in it, and make something on it. His reply came clear out of left field: M-I-L was a delightful lady, but in an Altzheimers care facility- $6,000 a month. Other than her mind, she was very healthy, and he figured she'd easily outlive her money, which was enough for about another year at the home. He said he could fuss around with the property, maybe get a little more money, but in the overall scheme of things, did it really matter if she ran out of money in a year, or 14 months? And maybe she'd die while still owning it, and they would then have to probate her estate. His goal was to get rid of all her property, and use the money until it was gone. Any other strategy would just be a bigger headache for all concerned.
One last note on non-judicial foreclosure- the lender gets the property (if lender is the high bidder), but that's it- no deficiency judgment, and debtor has no further liability.
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Today's Featured Article - Listening to Your Tractor - by Curtis Von Fange. Years ago there was a TV show about a talking car. Unless you are from another planet, physically or otherwise, I don’t think our internal combustion buddies will talk and tell us their problems. But, on the other hand, there is a secret language that our mechanical companions readily do speak. It is an interesting form of communication that involves all the senses of the listener. In this series we are going to investigate and learn the basic rudimentary skills of understanding this lingo.
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