What Liens Survive Foreclosure?
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 foreclosure deed 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 scenario, they can foreclose on other property you own to satisfy this debt though this 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, we would recommend hiring a representative to negotiate the lien.
Here are some of the liens that survive a foreclosure sale:
- Government Issued, Superior to 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 exception
- State Tax Lien
- Lien by USA or Dept of Justice
- US Department of State
- Other Federal Agencies
- Common Superior to Foreclosure-Liens:
- Code Enforcement Liens/Orders for debris removal, mowing/weeds, etc.
- Demolition or Environmental Based Liens
- State Child Support Liens
- Board of County Commissioners for special assessments
- Utility Liens
- Water/Sewer Delinquencies (only in selected states and/or counties)
- Unpaid Real Estate Taxes/Liens for any/all taxing jurisdictions
- City liens for road improvements, maintenance, etc.
- HOA or COA liens, if the property is located in one of the 22 Superior Lien states where the lien is in first priority.
- Here 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 mortgage
- Mechanic's Liens recorded after the foreclosing mortgage
- Other Judgments outside of the ones listed above recorded after the foreclosing mortgage