Trying to buy a foreclosure that has liens (car dealership also)

10 Replies

Hello Biggerpockets Family,

I am trying to buy a house in an auction and I see the house has a ton of lien (including a 40K lien from a car dealership). My question here is - if I win this property and get a "Special Warranty Deed", will I be required to pay the dealership and the rest of the liens?

Thank you!

@Uchenna A. Read the auction advertisement and determine which lienholder is foreclosing. All junior liens which are given notice of the foreclosure -- and which don't otherwise have some claim of priority -- will be extinguished.

So the short answer is NO, you likely won't be required to pay the dealership lien... but without seeing the title report and the auction ad I can't be 100% sure.

I have just sent you the title report via email. Please reply when you can. Thank you!!!

Read the auction terms.....if they are offering title insurance you'll be good to go.....but if you are successful, I Highly recommend paying for the title insurance by using your own title co. I assume this an REO auction, not a "courthouse steps" actual foreclosure auction.

Originally posted by @Wayne Brooks :

Read the auction terms.....if they are offering title insurance you'll be good to go.....but if you are successful, I Highly recommend paying for the title insurance by using your own title co. I assume this an REO auction, not a "courthouse steps" actual foreclosure auction.

Thanks Wayne. Here is what the listing says relating to titling:


  • Buyer will receive a Special Warranty Deed (SWD) or equivalent.
  • Property may be subject to leasehold interests or other rights or claims of various tenants or other occupants, and Buyer may be subject to the United States Service Members Civil Relief Act, or other federal, state or local law, as applicable.
  • Buyer assumes all responsibility and liability for any occupancy, and assumes all responsibility, liability and cost of taking possession. 
  • The title detail document has been prepared for informational purposes only. Xome makes no warranties, either express or implied, concerning the content of the title detail document, including the accuracy, completeness, reliability or suitability thereof for any particular purpose.

Does this give any more information? The liens in the listing actually total well over 100K but I may be reading it incorrectly.

This is a mess.

There is a $73,000 DoT in first dated 8/11/05 but not recorded until 1/27/06.

There is a $100,000 DoT in second dated 1/20/06 but not recorded until 2/16/06. 

The trust being foreclosed is a $288,000 in third dated 2/3/06 and recorded 4/28/06.

The title report has been provided for information purposes only.

Have a close look at all of those dates and tell me if you want to touch this thing. I could guess as to which liens are truly open vs just unreleased... but that's not how to properly play this game.*

If there was a title commitment to review, totally different story.

*I didn't even get to all the HOA liens.

@Tom Gimer , @Uchenna A. So this is Not an REO auction? I'd order my own title report, just to be sure. Tom knows his stuff, if this is a third, let alone hoa liens which I know nothing about in your state, it's a huge pass.

Tom, it looks the owner was playing shenanigans....with the close tim g of the second and the third, I'd bet the third didn't know about the second, probably paid off the first, thinking they were in first.  I'm guessing this owner played all kinds of games.

Originally posted by @Wayne Brooks :

@Tom Gimer , @Uchenna A. So this is Not an REO auction? I'd order my own title report, just to be sure. Tom knows his stuff, if this is a third, let alone hoa liens which I know nothing about in your state, it's a huge pass.

Thank you to both of you. One more question I have is whether bankruptcy wipes away any of those liens because it appears the previous owner filed for bankruptcy according to public records.

Originally posted by @Wayne Brooks :

@Tom Gimer, @Uchenna A. So this is Not an REO auction? I'd order my own title report, just to be sure. Tom knows his stuff, if this is a third, let alone hoa liens which I know nothing about in your state, it's a huge pass.

Tom, it looks the owner was playing shenanigans....with the close tim g of the second and the third, I'd bet the third didn't know about the second, probably paid off the first, thinking they were in first.  I'm guessing this owner played all kinds of games.

Exactly.

Not only that... in 2006 in Maryland, recording offices had a "gap" of ~2 months.  It was nuts. Title searches conducted during that time would have shown even less than those recording dates would suggest. So the third might have paid off earlier liens and not even known about the 1st or 2nd.

Honestly I'm not sure what a potential auction purchaser should do with the title information provided by Xome. 

But again, if there is a title insurer willing to insure over the open trusts... no worries! (Other than figuring out the HOA lien issues.)

BK wipes out the personal obligation on a debt, but not the lien/mtg/judgment, etc. against a property......they can still foreclose.

Originally posted by @Uchenna A. :
Originally posted by @Wayne Brooks:

@Tom Gimer, @Uchenna A. So this is Not an REO auction? I'd order my own title report, just to be sure. Tom knows his stuff, if this is a third, let alone hoa liens which I know nothing about in your state, it's a huge pass.

Thank you to both of you. One more question I have is whether bankruptcy wipes away any of those liens because it appears the previous owner filed for bankruptcy according to public records.

Liens survive BK. The creditors cannot pursue the debtor personally, but their liens survive. This is a HUGE issue in the title business.

That said, liens can be "stripped" (extinguished) in BK but that requires more than just going through the BK process. Unless there was a motion filed to do so, liens were not affected by the BK.

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