A property in Fishers, Indiana sells at a sheriff's foreclosure sale for $175,000. The outstanding first mortgage balance is $160,000, foreclosure court costs and attorney fees total $9,000, and there is a recorded second mortgage with a balance of $25,000. After the sheriff's sale, how much will the second mortgage holder receive from the sale proceeds?
Correct Answer
A) The second mortgage holder receives $6,000
Step 1 — Calculate total proceeds from the sheriff's sale: $175,000. Step 2 — Pay the first mortgage balance (senior lien): $175,000 - $160,000 = $15,000 remaining. Step 3 — Pay foreclosure costs (court costs and attorney fees): $15,000 - $9,000 = $6,000 remaining. Step 4 — Distribute remaining proceeds to the second mortgage holder: $6,000. The second mortgage holder receives $6,000 from the sale proceeds. Since the full second mortgage balance of $25,000 is not satisfied, the second mortgage holder may pursue a deficiency judgment against the borrower for the remaining $19,000 ($25,000 - $6,000).
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