Foreclosure Sale: Subject To Prior Liens.
In researching liens against an owner of a house going to forclosure action - which liens will affect the property if I should purchase it at the sale. On the particular property I am interested in the owner has two other mortgage type leins (an equity line & 2nd mortgage) that were recorded after the 1st mortgage, which is the one foreclosing. The owner also has several judgment liens on them. One of the judgment liens is placed by the 2nd mortgage creditor. How do I know if these leins are something to be concerned about. By the term subject to "prior liens" does that mean all leins prior to the 1st mortgage OR prior to the foreclosure auction sale?
That means all liens recorded at an earlier date than the one that is foreclosing. Sometimes a second mortgage will foreclose, and if you buy at the sale you are buying subject to the first.
You should spend a little time researching lien laws in your state to determine if any have special priority. For instance, here in California, property tax liens and mechanic's liens attach senior even when recorded at a later date. Property tax liens are always senior, while mechanic's liens attach based on the date work commenced (not based on the date the lien was recorded). IRS tax liens can be wiped off title at the sale, but they have a 180 redemption right...they can buy the property from you at the price you spent (you get no compensation if you improved the property).
With that said, you should have a title report done or learn to research title yourself so that you're fully informed come time for the auction. It's all part of your due dilligence so you know in advance what you're getting into. Buying at the auction can get you into a lot of trouble.
Asking here in this forum is a good first step, but you might want to give your local real estate broker a call and just ask. They should be up on the laws in their state, and most probably won't mind answering a few out of the ordinary questions.
[ Edited by wannabe21 on Date 06/24/2004 ]
From my experience in Iowa, you need
1. to check to see if there are any senior liens on the property (those that are recorded prior to the one foreclosing) and
2. Make sure each junior lien was served notice correctly. If there is a lien on the property and they were never let know that their lien is about to be wiped out, they are still entitled to that lien.
3. Check to see if there are any property taxes due as I don't think these are wiped out.
I've only bought one property at sheriff sale so far and it was a pretty easy process. GOOD LUCK