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 to 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.

Below are some of the liens that survive a foreclosure sale.

Government Issued Liens Superior to Foreclosure:
  • IRS in some circumstances (if IRS does not excercise its redemption right within 120 days of deed recording, it will automatically expire)
  • Department of Treasury with USC exception
  • State Tax Liens
  • Liens from USA or Department of Justice
  • US Department of State
  • Other federal agencies

Common Liens Superior to Foreclosure:
  • Code Enforcement Liens and Orders (for debris removal, mowing, weeds, etc.)
  • Demolition or Environmental Liens
  • State Child Support Liens
  • Board of County Commissioners for Special Assessments
  • Utility Liens
  • Water/Sewer Delinquencies (only in select states and/or counties)
  • Unpaid Real Estate Taxes/Liens for any and 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

PACE Liens
A PACE agreement constitutes a super-priority lien, which will take priority over a mortgage even if recorded after said loan. While the PACE loan's function is for property energy improvements such as solar, the property itself is the collateral. Should a mortgage foreclose, the PACE lien would not be wiped off by the foreclosure as it is higher priority and stays with the property. Additionally since PACE liens are not consistent from county to county or state to state, they can be recorded in land records or only in the tax office, and may not be easy to spot as the naming convention can be different than just PACE. Currently only three states have PACE programs for residential properties (California, Florida and Missouri) while 38 states have programs for commercial properties.

Judgments 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 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 (recorded after the foreclosing mortgage)
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