Can liens be removed (with tenacity and grit?)

Question

I am looking at an auction property.  The auction/sellers included a prelim title report and it is UGLY! Over $70,000 in various liens, and some, such as unpaid child support, have no amounts listed. This house is only worth $100,000 in the condition it is in. But it could be rehabbed and is in a nice neighborhood. Could sell for $170K. If the liens weren't an issue, it qualifies, in my book, as a decent flip. I talked to another investor recently who was able to have liens removed. According to this person, it took 4 months, but the house, when flipped, earned $60K, after all costs.  What info does anyone have on any of this? This will only be my second purchase if I can make it happen, i.e. wade through the lien issues. I do have tenacity and grit and am fully committed to becoming a savvy investor through experience and education. I just want to keep hold of my $$$ until I get there.  Does anyone have experience on removing liens?

Jay Hinrichs · Answer

Account Closed  Oregon is both judicial and Trustee.. Since the OP does not say if this is a true foreclosure or not... I am assuming its a judicial since she alludes to a 6 month right of redemption.

if its is judicial  court house steps auction then all of the listed items above will be removed from title... upon the sale... IRS as stated sunsets in 120 days.. they NEVER redeem at least not for these small properties.

the OP should also understand about redemption rights.. this is bigger issue than anything that she has posted about... along with the fact that there will be a lot of competition if the numbers OP  stated are in fact correct.. IE minimum bid 70k  resale 170k and say normal rehab of 30 to 40k.. this will bid up substantially..

In this instance redemption rights would be bought to simply try to get money out of the successful bidder so they could more the project along quicker instead of waiting the 6 month period out.

the other issue that Oregon foreclosure buyers usually learn the hard way and what is not removed from title is Senior tax deferral.. the deferral of ad valorum tax's that may or may not come up on a trustee's sale guarantee, best to get on the horn and call the county personally to ascertain that there are not any those survive foreclosure sale

Account Closed · Answer

Hi Jodee,

This is a niche that I highly recommend you spend some money to get an expert in this field to train you. In general, most liens can be removed through a settlement, or they'll fall off after the redemption period. Also, some junior liens will get wiped off the title if you buy a senior lien at the auction.

Here are some rough examples: assuming the 1st lender is foreclosing, the 2nd lien such as a HELOC will get wiped off the title while the IRS and FTB liens have 120-day rights of redemption. If you're a successful bidder, you have two options: 1) settle with the IRS for pennies on the dollar, or 2) let the 120-day redemption period lapsed. HOA lien normally has 90-day rights of redemption; however the laws vary from state to state. If I'm not mistaken, the child support lien will also get wiped off the title, but I'll have to verify that as it's not very common. Also, CA is a non-judicial foreclosure state while I have no clue if Oregon is a judicial or non-judicial state, but my guess would be non-judicial. Let me tag @Jay Hinrichs. Hopefully he can give you some pointers as he also lives in Oregon.

Have to run. Best of luck.

Wayne Brooks · Answer

@Jay Hinrichs Yes, I totally overlooked that this sounds like a REO auction, not the foreclosure auction.  Sounds like the bank doesn't have clean title. IF they are offering title insurance, the sale is likely to fail since, from the info posted, they don't have clear title.  IF they are Not offering title insurance, then the buyer would inherit the liens, from the info posted. I'd be reviewing the foreclosure file and who was/was not served, but that's just me.

Account Closed · Answer

Jodee,

It's a good thing that @Jay Hinrichs caught it. This is the first time I've heard of an REO auction WITHOUT a clear title. I haven't seen it in CA, but that apparently doesn't mean it doesn't exist. This is one of the reasons why I tend to take the fifth when people from other states ask about trustee sale or auction.

There are two types of auctions as far as I know. One is a trustee sale auction, and one is an REO auction. With an REO auction, there's a high probability you will have to pay a 5% buyer's premium as a winning bidder. I suggest you verify this with the auction company upfront. If it's a trustee sale auction, you buy as is, where is, and you inherit all the warts that come with the property. Under this scenario, you don't have to pay a 5% buyer's premium.

Good luck.

Chad U. · Answer

I'm pretty sure that the State Tax liens will survive foreclosure as well, according a very trusted nationwide title search company that I and many others on BP use.  See below:

https://www.protitleusa.com/foreclosure_survive_li...

Jay Hinrichs · Answer

@Wayne Brooks  the issue is Jodee  is not conveying what type of sale this is.. she has a lot of stuff convoluted so until she can state the specific type of sale this is all conjecture.

However it would appear to be a auction .com type thing or hubzu..

we don't use attorneys here often we have big foreclosure mills.

But as you state notification is important and we just assume the trustee has done that.. We NEVER look at the file.. I have bought probably 500 plus of these in ORegon and never once looked at the file. LOL. But I suspect these are after foreclosure sales by the lender in possession. not a true judicial or trustee sale.. but only Jodee can clarify that.

Wayne Brooks · Answer

You need to talk to a local RE attorney.....but, if the creditors were not notified, then generally the foreclosure has no effect on their liens.  You'd either have to do some type of reform closure/amended foreclosure, or negotiate with the lien holders.  A note, if I'm a lien holder and the first Mtg was removed, I'm in a Lot better position now, equity wise, so if I know this I'd have much less incentive to negotiate a big discount.  If the IRS was not served, that's a problem, since there is now a bunch of equity.

@Jay Hinrichs ??

Jonathan Blum · Answer

I had a similar situation with a property in The Dalles, OR.  I bought it with two items on the title.  Both were liens from previous credit card debt that was encumbering the property, about $15k worth.  I was able to settle one for the amount originally owed (got rid of $3k of accrued interest) and am still working on the other one.  It has been a major hassle but worth the struggle.  Many of the creditors will only correspond with you via mail and its hard to get them to settle without having a lawyer involved.  I bought this one because I knew it was a good deal even if I had to pay the entire $15k, but yours doesn't sound so good if you had to pay the entire amount as a contingency.  Best of luck!

Account Closed · Answer

I would like to add, if not mentioned that  the Irs should be listed as a defendant in the complaint, otherwise the lien will remain post sale.  That's my understanding.

Jodee W. · Answer

Sorry, just got back to the computer. It is Auction.com. I was thinking of doing a pre-auction bid.

Can liens be removed (with tenacity and grit?)

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