All Forum Posts by: Greg Wilkins

@Ray Slack

HOAs have a super priority, but only for the 6 months worth of fees and charges that became due in the 6 months immediately preceding the foreclosure sale. The rest of the lien as to anything prior to that 6-month window is divested (as long as the HOA was notified properly according to rule 3129).

Lien priority would look like this:

1. Municipal taxes and charges like water and sewer

2. 6-month hoa lien

3. 1st mortgage

4. Remaining HOA lien

5. 2nd mortgage etc.

They real question will be wether the sheriff includes the 6-month portion in their schedule of distribution to be paid from the proceeds of the sale. If they do that, then you are golden. Otherwise, you have to pay the 6-month window. Don’t assume that the 6-month window is only the monthly dues. There can be attorney’s fees and/or special assessments that might fall in that window.

@Steve K. A good title company should be able to tell you what liens, if any, will not be divested by the sale.

Steve:

I will attempt to answer your questions as you asked them:

1. Yes, the foreclosing mortgage will be divested (wiped out) by the sheriff’s sale. All other junior liens will also be divested provided that the foreclosing attorney provided those lien holders with proper notice.

2. A junior mortgagee can decide to foreclose, but the foreclosure is subject to the senior, so, yes, the purchaser would be responsible for paying the senior.  This is allowed.  The fact that the junior and senior are held by the same lender doesn’t really matter.  

3.  Correct, the AOS will become void once the property is sold at sheriff’s sale.  There is always a chance of further postponement. Right now many sales are being postponed because the lender does not want to proceed given the covid-19 situation. Call the foreclosing attorney, they may be able to tell you if they plan on taking the property to sale.  

4.  IRS liens and State liens must be filed with the prothy in order to be liens on the property.  Although there are some exceptions. PA inheritance tax comes to mind. 

5.  That amount is the county assessed value multiplied by the county’s common level ratio.  

6. People do this all the time. However, I would talk to lenders now to make sure they are familiar with what you want to do.  Once the deed is recorded you should have insurable title. I do not know any lenders.  

I hope this helps.  Good luck.  

@Steve Babiak

Generally speaking, only liens that are divested by the sale are entitled to proceeds in distribution. Since the State is taking the position that the inheritance tax lien survives the sale it should not be paid through distribution. The attorney for the mortgagee will likely fight against having it paid out of the proceeds. It could go either way, but I wouldn’t rely on that as a solution. There is also the issue of how much would the sheriff pay to the department of revenue if no one has filed a tax return.

Inheritance tax is owed on the value of the property at the time of death (or thereabout) minus the debts owed against the property.  Most title companies will require that you obtain a release or a notice of appraisement showing that $O is owed from the PA department of revenue.  Upon acquisition of the property you would need to request a release from the state or file an inheritance tax return, which can be done even if an estate has not been opened. Seek advice from an experienced estate attorney. 

Another thing is that the state will not use your purchase price as the value of the property.  You can use the county assessed value x the county common level ratio or an appraisal. 

The goal is to get the value to be less than the debt so that the tax will be zero.  Otherwise you will owe on the difference. 

The tax rate depends on the relationship of the heirs to the deceased.  Direct defendants = 4.5%, siblings = 12%, and others = 15%.  

You do not have any recourse against the foreclosure attorney or the mortgagee, IMO.  If there were issues with the foreclosure, then you bought them along with the property.  

You can avoid payment of the tax if the value of the property at the time of death was less than the debts owed against it.  I would seek the advice of a seasoned estate attorney to help you file the appropriate paperwork with the department of revenue. I have seen it done two ways: 

1) file for a lien release. However, this may be reserved for mortgagees that take ownership via sheriffs sale.  

2) file an inheritance tax return showing that the debt(s) owed were greater than the value of the property.  This can be done even if an estate was not raised/opened for the deceased. 

The department of revenue is currently taking more than 4-6 months to respond regardless of which way you choose.  

@Samuel Young

I am still following this thread. If you purchased on Monday, I am assuming it was an upset tax sale. Which county?

@Mark Case

You have a classic case of “it depends.” A first lien mortgage will divest all junior lien creditors providing proper notice was given to those junior lien holders. As @Chris K. said there are different rules for IRS liens, but they are divested if the foreclosure attorney handles it properly.

I would be happy to try to look at it further for you and try to figure out what your agent is talking about.

The first filing with the court (prothonotary) in PA is a complaint in mortgage foreclosure. (Not a lis pendens or some sort of default notice). Therefore, you want to obtain a list of all foreclosure complaints filed in a certain time period (month of July, for example) in order to reach out to those owners/borrowers. A title company could probably get you this info for a fee. If you want to do it yourself, you may be able to do it online, but it would take a bit of time looking through a long list to identify the foreclosures.

@michael Knaus. If the creditor was not served with notice then the lien will survive the sale. However, there is a PA rule of civil procedure that allows you to file a motion to attempt to divest the lien in this situation. PaRCP 3135(c). You would have to weigh the cost of doing that vs the cost of paying the creditor. In these situations I would reach out to the attorney for the creditor and see if you could strike a deal. Good luck.