County tax deed sale - private liens

[Rushabh Sheth]

Hello all,

I'm located in California and I have a question about a California county tax deed sale. If you win the bidding on a tax deed and receive the deed to the property (with or without the redemption period), are the private liens wiped out? Private liens include:

- mortgage liens
- homeowners liens
- mechanics liens

I understand that government liens (eg. state tax liens, IRS liens, etc.) are not wiped out and still remain. But I would like confirmation that the private liens are indeed wiped out. Thank you.

[Rushabh Sheth]

Jimmy,

The reason the mortgage lien is wiped out is because the state/county needs to generate tax revenue QUICKLY and one incentive for someone to make good on the unpaid taxes is to wipe out all liens except government liens. This provides a tremendous incentive for someone to quickly pay off the unpaid taxes in exchange for the opportunity to acquire the property free and clear of all liens except the IRS/government liens.

The state/county is interested only in getting their money FAST. Without the mortgage lien wipe-out, there would be less incentive for investors to purchase the tax deeds, even if they earn 10% to 15% on their initial investments. It would take much longer for the state/county to collect their money that way.

And the reason you will almost never see deals like a $5,000 lien on a $100,000 property is because the mortgage company will almost always redeem the unpaid taxes and thus take the tax deed off the auction block. It is very rare for a mortgage company to miss out on protecting their first lien position by redeeming the unpaid taxes.

That's why the tax deed sales are usually a waste of everyone's time - the good stuff is almost always redeemed and by the end of the auction, only the tax deeds secured by undesirable properties are left standing.