All Forum Posts by: Jesse Morrell

@Nathan Caffero I bought a foreclosure for 47k which at the time was worth 90k. Today it is worth 200k. I only had to put 7k into it.

I also bought a foreclosure for 60k which at the time was worth 181k. Today it’s worth 220k. I had to put 30k into it to make it marketable.

With 50k, I’d buy a foreclosure and then fix it up either as my income allows, with a financial partner, or with an Amex credit card and Lowe’s credit card.

Maybe I heard wrong about Trustee Auction properties not wiping out liens in Texas:

"Properties may (and often do) have multiple liens against them. "A valid foreclosure on a senior lien (sometimes referred to as a ‘superior' lien) extinguishes a junior lien (sometimes referred to as ‘inferior' or ‘subordinate') if there are not sufficient excess proceeds from the foreclosure sale to satisfy the junior lien . . . In general, mechanic's liens whose inception is subsequent to the date of a deed-of-trust lien will be subordinate to the deed-of-trust lien." Trinity Drywall Systems, LLC v. TOKA General Contractors, Ltd., 416 S.W.3d 201 (Tex.App.-El Paso 2013, no pet.). As to competing M&M liens, a perfected M&M lien is deemed to relate back in time to the date of its inception. Leases, including ground leases, are generally terminated as well. Kimzey Wash, LLC v. LG Auto Laundry, LP, 418 S.W.3d 291 (Tex.App.-Dallas 2013, no pet.).

Notice to the IRS

The best practice is to do a title search prior to foreclosure to determine if there is an IRS tax lien or other federal lien. If so, notice must be given to the IRS and/or the U.S. Attorney at least 25 days prior to the sale, not including the sale date. 26 U.S.C. § 7425(c)(1). If this is not done, any IRS tax lien on the property will not be extinguished by the sale. Note that the IRS also has 120 days following the sale to redeem the property, although this seldom happens. The successful bidder on an IRS-liened property is therefore not entitled to breathe a sigh of relief until the 121st day.”

@Wayne Brooks so if you buy the property through the second lien at auction, you inherit the first lien with it. But if you buy the property through the first lien, the second liens get wiped out?

My understanding for Texas was that liens only get wiped out at the County Sherif Tax Sale, but properties auctioned at the Trustee Sale come with any and all liens attaches to the property - none get wiped out.

So when I buy a property in Texas, I search for any liens and am ready to pay any of them if I buy the property. So far I’ve just purchased first liens with no secondary, and never wanted to buy any second liens because I was unsure of them.

But it makes sense to me, if you buy the second you get the property and are now responsible for the first. That helps me out a lot. Thanks guys.

Along these liens, has anyone ever purchased a property through the second lien and then negotiated Subject To with the first lien holder, merely bringing it up to date rather then paying it off?

@Ron S. Yes I think another scenario I heard of it people buying second liens by mistake (thinking they got a really cheap deal), thinking they were buying the first, only to find out later and not having enough to pay off the first.

@Ron S. Ok. So when you buy a second lien at auction, are you buying the property or just the ownership of the second lien?

@Scott Lennon the less debt that you have, the less you have to worry about. Debt free is the best position to be in if the market turns.

@Cameron Weld if you go to the county clerk office or website, you can pull the title history yourself for free because its public record and look for any liens that have been filed against the property. But in Texas, those liens don’t matter for sheriff tax sales.

@Cameron Weld each state is different. You have to research the laws of your state. Google says Michigan has a one year right of redemption.

In Texas, we have a two year redemption period. If redeemed in the first year, it includes 25% interest. If during the second year, it’s 50% interest.

And all liens and mortgages fall off at the Sheriff Tax Sale. So mortgage lenders usually pay the taxes themselves if it’s worth it to them, to avoid the sale.

Also, interest from redemption is based on purchase price and any essential or necessary repairs required for maintaining the property, not on any upgrades. So people don’t upgrade until the redemption periods have expired. You also can’t flip it or get a clear title until the redemption period is over, so these auctions attract more landlords than flippers who prefer trustee auctions which do come with any liens but no redemption periods, in Texas.

It seems typical that liens and mortgages fall off at tax sales but you have to research the laws for your state.

It also means people who would have built new might consider buying old because of greater sq ft 

Yes prices can drop below the cost of construction. But lumber prices are keeping new construction down, which keeps inventory down, which keeps prices up.