Buying a property (title) with 3 bank liens.

9 Replies

Hello BP,

I am being offered a property for pennies on the dollar. I would be buying the LLC which owns the property. It's a good enough deal that I am willing to put in the work to try to get a settlement. The liens are not on the LLC but against the previous owner. My question is by buying the LLC and therefore being the title holder would I then become responsible for the liens?

Thanks in advance.

If said liens have not been paid and/or released, you can't ignore them.

The liens are against the property, no matter who the owner is. This sounds like a typical, was common, someone deep underwater deeded their property to someone looking to collect rents until one of the lien holders foreclosed. I assume you checked for any foreclosure actions. Highly unlikely lay you could ever negotiate the liens down to have any equity.

Yes you'd become responsible for the liens on the property. How are you buying the property? Cash? I doubt a title company would insure a property with 3 known liens on it. 

You would be the new owner, but you can't sell the property without clearing the liens. You could try to renegotiate with the lien holders, but I would ask those questions prior to buying the property. The liens are debt, which is a liability against any equity the property has. If there is equity, refinance and pay the liens off. If there is no equity, why would you want it?

Originally posted by @Bob Okenwa :

Yes you'd become responsible for the liens on the property. How are you buying the property? Cash? I doubt a title company would insure a property with 3 known liens on it. 

Some might. But the liens would be disclosed as exceptions. And if the secured parties were not paid, they would presumably foreclose.

I would be buying it cash. Title company will never insure unless the liens have been satisfied.  I’m acquiring an adjacent property with the intention of developing multi family buildings. This property would significantly boost the value of the development. The development is going to take us at least 3 years my idea is to try to negotiate with the banks while moving forward with the development. How ever I do not want to be held liable for the balance owed to the bank. 

 By purchasing the title would the bank have the right to hold us responsible for the balance even though the liens are against an individual? 

Thanks for your help.

Originally posted by @Armando Payano :

I would be buying it cash. Title company will never insure unless the liens have been satisfied.  I’m acquiring an adjacent property with the intention of developing multi family buildings. This property would significantly boost the value of the development. The development is going to take us at least 3 years my idea is to try to negotiate with the banks while moving forward with the development. How ever I do not want to be held liable for the balance owed to the bank. 

 By purchasing the title would the bank have the right to hold us responsible for the balance even though the liens are against an individual? 

Thanks for your help.

Yes, as previously stated the liens are attached to the property, not the person or entity who incurred the payment obligation. If the underlying loan(s) have not been satisfied, they are continuing to accrue interest and must be paid in order for them to be released from title. 

I can actually think of a few situations where a title company would insure a transfer, subject to existing liens, in a cash sale. 

You obviously need to figure out the balances. Perhaps waiting until one of the lenders forecloses since you have long term plans is the right path.

The house has little to no value as it has been abandoned for years and is in severe disrepair. Liens total 480k with land value at about 300-350k. My thoughts are to put it in a separate LLC, if they foreclose it me being the principal of the LLC would it affect my credit?

Originally posted by @Armando Payano :

The house has little to no value as it has been abandoned for years and is in severe disrepair. Liens total 480k with land value at about 300-350k. My thoughts are to put it in a separate LLC, if they foreclose it me being the principal of the LLC would it affect my credit?

Paying pennies on the dollar for something with huge negative equity? 

I don’t see the upside but perhaps someone else has better vision. 

I would wait until the lender in first position forecloses. 

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