In a foreclosure auction, if a property sells for $88,000 with a $60,000 first mortgage and a $23,500 second mortgage, which statement is FALSE?

The statement that the proceeds are divided equally among all lien holders is incorrect because foreclosure laws dictate that the priority of liens is crucial in determining how proceeds from a foreclosure auction are distributed. In the scenario described, the first mortgage has priority over the second mortgage.

When the property sells for $88,000, the first mortgagee, who is owed $60,000, would be paid in full first from the auction proceeds. After the first mortgage has been settled, if there are sufficient funds remaining, then the second mortgagee, who is owed $23,500, would be paid next. However, in this instance, since the total remaining after paying the first mortgage ($88,000 - $60,000 = $28,000) is greater than what the second mortgagee is owed, they would receive their full amount as well.

If the amount received from the auction does not cover the second mortgage, then that mortgage holder would not receive anything from the proceeds unless they had taken action to enforce the foreclosure, such as bidding at the auction. Additionally, the investor would need to settle both mortgages to transfer clear title to the property, highlighting the need to address lien priorities.

Understanding these dynamics clarifies why the statement regarding equal division of