Auction of property with Multiple Loans?

Question

Quick question - if the property in auction has lets say three mortgages open - and only one plaintiff is running in the auction - what happens to the other two loans?

1 - Does the plaintiff add up three total loans - and auctions for the total number?

2 - Or, it speaks for its own number only? In that case - the winning bidder - does he assume the open loans on top of what he pays for the house?

3 - Any way to find out what is the Plaintiff running the auction for - all three - or just its own?

Thanks.

Chad U. · Answer

Yes, that's what I meant as I hastily replied. For a full explanation to the OP, here is: If you purchase a property at a foreclosure auction and later find that there is a government lien or lien that survives the foreclosure auction, you will be responsible and indebted. Once the Certificate of title (in FL) or Sheriff's Deed or Trustee's Deed (name depending on state) is recorded and the parties of interest (lien holders) are notified, you will be on the hook. The county, at their discretion, can attach many liens to other properties owned by you when they are the lien holder. If you were to sell your personal home, the lien would have to be satisfied prior to issuance of title insurance. In a worst case, they can foreclose on other property you own to satisfy this debt though it rarely happens. Typically, if you purchase a foreclosure auction property and contact the entity holding the lien and explain the situation they may reduce or strike off the foreclosure-lien held against the property. As a new investor, if you find yourself in this situation, it is recommended hiring a representative to negotiate the lien if it is federal, it could actually save you money. Here are some of the liens that survive the foreclosure sale: Government Superior Foreclosure-Liens:IRS-under special circumstances (under 120 day redemption period from deed recording). If IRS does not exercise its redemption right within the 120 days it will automatically expire. Department of Treasury with usc exceptionState Tax LienLien by USA or Dept of JusticeUS Department of StateOther Federal AgenciesFrequent Superior Foreclosure-Liens:Code Enforcement for debris removal or mowingDemolition or Environmental Based Liens State child support lienBoard of County Commissioners for special assessmentsUtility LiensWater/Sewer Delinquency (only in selected states)County (and/or School/Township) for unpaid taxesCity for road improvements, maintenanceHere are some of the judgment and liens that will be wiped off from the property (not the borrower who lost the title) if the lien holders were properly notified and "had the right to bid on the property at the auction":2nd and junior position mortgages, such as home equity loans, etc...Credit Card Judgments recorded after the foreclosing mortgage Personal Judgments recorded after the foreclosing mortgageMechanic's Liens recorded after the foreclosing mortgageOther Judgments outside of the ones listed above

Ron S. · Answer

You need to do a lot more research before you start bidding your retirement savings on foreclosure investments. In a nutshell:Liens superior to the foreclosing entity survive. Liens junior to the foreclosing entity get wiped out. Any lien whether it is a mortgage, home loan, home equity line of credit, mechanics line, bitter ex spouse lien, or IRS (Or whatever) that is ahead of (In line for recording) the foreclosing entity survives the foreclosure.IRS liens are not property tax liens. They are liens usually for income tax liabilitiesYesSee bullet point 1. If they are in front of the foreclosing lien, they survive. If they are behind the foreclosing lien, they get wiped out. (you cited "income tax" in your description of personal liens. If the "personal lien" is an IRS or state tax lien, that lien has redemption rights that will expire but are not wiped out by the foreclosure. While they don't have anything to do with the auction property, they impact the buyer because they have to be waived by the lien authority prior to having clear title).

Ron S. · Answer

I was the second lien foreclosing. I was foreclosing on my $50M lien. I also had the senior lien at $450M. I didn't need to foreclose on this. Suffice it to say, that part is complicated and the reasons behind the same lender foreclosing on one over another is a conversation for another day.BTW...no. I don't care what anyone tells you. The answer is no. You get the correct information from two places and two places only and only one tells you what the CURRENT situation is...that's the borrower with the loans. He/She has a copy of any and all notices, past due notices, statements, etc.. If they are disclosing everything to you, you'll know what they owe. The 2nd source, and I keep telling you this is the preliminary title report and you can ask your question different ways but the answer is the same. you have to spend the money to get a prelim. If you have a contact at a title company, they may give it to you but I'm sure you'll wear out any favors that they may owe you quickly and that source will dry up. That will give you the lien amounts at origination (recording date). That may or may not be what is owed. Only a payoff demand will tell you what is owed to the penny. you'll need a prelim in order to know who to ask for a payoff demand. Unless you are buying at foreclosure. You'll still need to know what the liens are. Don't spend a huge amount of energy racking your brain over junior liens. They aren't the one that usually forecloses. You only need to know if it is them foreclosing and in the rare situation that it is them, THEN you need to know what the senior lien outstanding amount is. Start by knowing what the original amount was. Go from there.

James W. · Answer

$450K lien?? Was there a second mortgage? What was it??BTW - any online search to determine open loans on a property? How do I tell the property has one more loans?

Ron S. · Answer

I pay for a full blown TSG (Trustee's Sale Guarantee)....title report, every time. In California, I spend thousands to foreclose and still, with all of the reports I pay for, there are still mistakes. That's why I also pay for a title policy. Still, with reports and title policies, on very very rare occasions, I can still get hurt. I just recently foreclosed on a property and when I went to sell it, the buyers title company found a $6,000 lien from 1986 from a now defunct down payment assistance organization from the state. I had to pay it even though my title policy didn't show the lien. That's a rare situation and I did file a title claim (I don't think I'll win it though). While I agree, the cost is a heckuva lot more than calling the county, the consequences of not knowing the liens that could bite you are greater. Buy a property at foreclosure for $50,000 that is worth $500,000 only to find out there is a $450,000 lien AFTER you win the auction. Had that happen to another of my foreclosures. I got paid my $50,000 for my junior lien and then when the buyer called to ask for the keys, I also gave him a demand for $450,000 along with the keys (I had both loans). he freaked out. I would have too. He only looked in the newspaper to see my lien foreclosing and didn't bother to find out if there were any other liens in front of me. He ended up paying me off in full.I can't offer an opinion on the IRS scenario other than to say, why? Why would you want to? They aren't going to redeem it (You say "They". I assume you mean the borrower subject to the lien?).

James W. · Answer

Ron, you've been doing this for several years, correct? Thats awesome from a newbie's shoes. Do you pay for the property report every time? It must be very difficult when you're looking at couple potential properties. No?Also - if theres a IRS lien - can I offer to pay it on behalf of the defaultor, than letting them redeem it?

Ron S. · Answer

You wont' be harmed because, if they are behind the foreclosing entity, they get wiped out. If they are IRS liens, they will either waive their lien or take the property and give you your money back. HOA liens are another story. Depends on the state on their superiority and/or amount that sticks to the property. Some states are limited to 6 months, some to 12 months of back dues. Some are limitless. Some depend on the CCR's of the condo association and lastly, NO! I would not rely on a call to the county to systematically find a way to get all liens. The only way you can systematically get information on all liens is to order a preliminary title report and pay for it.

James W. · Answer

I think I got it.UPDATE - I just called the County. They told me the Tax and Condo Fees liens on this person. Even a Child Support. They all total up to 10K. So it seems there IS a systematic way to find out the liens and encumbrances - that is - to speak to the county clerk like i just did.What i am trying to do here is - find out a systematic way to get all the liens and encumbrances - that can be repeated every time - before going to an auction. Rather than reinventing the process every time.The question now is - is this information enough for all practical purposes? Could there by yet another encumbrance somewhere that the county doesnt have recorded. Could it be fifty thousand dollars?Ron, why do you say -"You aren't going to be harmed financially in either event (personal or IRS)." I thought I would need to pay off this child support lien? Correct?

Ron S. · Answer

The buyer will not have to deal with them. We are talking about two different things here Buying and foreclosing. If while in foreclosure, a "personal lien" (Which will attach to the property) gets in line in front of the foreclosing entity, yes, the buyer will have to deal with them. The chances of that happening are immaterial in risk. No lender in their right mind will lend with a lien like that in front of them. If the lien is behind (personal liens like you mentioned) they will get wiped out. so, if there are credit card liens or child support liens (personal in nature, not from any authority like the IRS), they will get wiped out in a foreclosure. If it's not a line related to a lawsuit where the plaintiff got a judgment and sought to enforce their judgment with a lien and is instead a lien by some authority like for income taxes, they do go away, eventually. As many of us pointed out to you, there is a statutory right of redemption. The IRS can waive their rights or, they can exercise their rights within 120 days of foreclosure sale. If you are the successful bidder and their are tax liens, you either try to get the lien waived or you wait for 120 days before you go putting in new carpet on the place! It's pretty simple when you think about it. I wouldn't get all worked up over the "personal liens" issue. It's not an issue for all practical matters (key word). I wouldn't get too worked up over the IRS issue either. You aren't going to be harmed financially in either event (personal or IRS). Worse case scenario is, IRS wants the property. You get your money back.I've been doing this for just a little while (25 years) and I can't recall a situation where the IRS exercised their lien rights.Hope that helps...

James W. · Answer

Sorry for being so dense - BUT - Liens that survive, and liens that the new Buyer has to pay - seem two different things to me.Liens unrelated to Property may SURVIVE - like Credit Card, IRS Taxes, Child Support. But are you saying they are now the Buyer's problem? And Buyer has now to pay the guy's Credit Card bills, Personal Taxes and Child Support - just because he bought this house from the auction??I cant imagine this to be correct. I can imagine any liens to SURVIVE, but if those liens are unrelated to property - they seem to be the Defaultor's problem - and not the Buyer's. Correct? Even the IRS and State Personal Taxes. They are not on the Property.However - liens related to Property that Survive - would be the Buyer's problem - correct? Property taxes, Sewer, condo dues, others.