Real Estate sold at Sheriff Auction (from civil judgement) subject to mortgage liens?

3 Replies

Hello,

Suppose a homeowner is sued and his house is auctioned off in a Sheriff Sale. Am I correct to assume that this real property is still subject to liens such as the original mortgage? 

I believe in an unpaid Tax auction a mortgage lien is wiped out, however when the property is being auctioned by the Sheriff as a result of a civil suit I am not sure.

Correct, as most 

Imply the judgment forcing the sale occurred after the mortgage was recorded.

Yes, I am seeing a condo due to be auctioned by the Sheriff as a default judgement from unpaid (I assume HOA) dues. Default judgement for the plaintiff as the owner didn't show up. I am assuming whoever "wins" the auction will inherit the mortgage at it's current principal amount? If this is correct I doubt anyone will bid

It depends on the state, and in super-lien states it is very difficult for an HOA to supersede the 1st lien and usually its not worth it. In a tax sale scenario the IRS will definitely take the property ( usually if it does go to tax sale the servicer/bank doesn't really care, they probably aren't even pursuing foreclosure so thats why didn't advance the property taxes that were due )

In most states the HOA lien does not have any priority over the 1st mortgage lien and whomever is the winning bidder does not assume the mortgage ( thats another process ).

Usually if the property goes to a foreclosure sale by the HOA it is so the HOA can recoup their delinquent HOA dues, or in the case of a civil judgment it is to get what is owed by the debtor.

So typically what will happen is  they will go to auction and if they don't get a winning bidder they acquire the property and then can evict the person living in the property ( if they still are there ) and they will rent out the property until the 1st mortgage lien forecloses on the property. Same with a civil judgement, it does not supersede the lien in 1st position so if someone does purchase the property at sale they will usually just try and rent the property. 

There are a lot of different things that can happen but generally this is what happens. 

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