I am getting ready to purchase a home at the courthouse steps. If there is a first and second lien on the home and I win the bid for the first lien what happens to the second lien? Do I have to consider it when bidding because I have to pay it off also?
We have purchased many homes at the courthouse steps here in our state but we have never had to worry about any liens. We did however have to pay any back taxes. We always had our closing attorney do a quick title search for us.
Dealing with any liens sounds messy.
It depends on what the 2nd lien is. The 1st must notify and name any junior liens in the foreclosure action judgement. If it is an HOA, or back taxes then they may survive.
As for other liens that survive, these can be:
- IRS-under special circumstances (under 120 day redemption period from deed recording). If IRS does not exercise its redemption right within the 120 days it will automatically expire.
- Department of Treasury with usc exception
- State Tax Lien
- Lien by USA or Dept of Justice
- US Department of State
- Other Federal Agencies
- Code Enforcement for debris removal or mowing
- Demolition or Environmental Based Liens
- State child support lien
- Board of County Commissioners for special assessments
- Utility Liens
- Water/Sewer Delinquency (only in selected states)
- County (and/or School/Township) for unpaid taxes
@Steve Babiak has also graciously compiled a list of forum posts related to courthouse auction sales below:
The lien you are bidding on is the first position mortgage, and so the second position mortgage lien should be extinguished upon foreclosure being completed by the first (assuming that the second lien holder received proper service / notice of the first foreclosing). Sometimes the first mortgage to record can become second in line to get paid - this happens when a mortgage subordination is agreed to; if there is a subordination, what looks like a first might not be first to get paid!
And I believe that the list of federal gov't liens that @Chad Urbshott listed all follow the same rights of redemption as for IRS liens; other than the IRS liens, the remaining listed federal gov't liens are rare in my area, so I am not 100% certain on that.
You are in Texas, you need to pull the foreclosure file and check that all lien holders were notified of the sale. If a lien holder can prove they were not notified that lien stays. Chad points out all the possible liens that can survive. Do a title search to see what may be on title.
Have a cut off point that you will not bid above. Emotions can cost you thousands. Also call the trustee on Monday to verify the taxes have not been redeemed before the sale.
Thanks for all the feedback, I'll keep you updated on how we do. I'm not sure how to verify the second lien holder was notified but not talking any chances and will account for that lien in our bid just in case until we get more experience. We have done all the other research on any other possible liens
Regarding "I'm not sure how to verify the second lien holder was notified" that should be in the foreclosure file. Green return receipt post card (or copy of) or sheriff notice (in some states) will generally suffice.
How did this turn out?
Thanks for checking. There were 2 we probably should have bid on but one showed an owner with an irs lien ( not attached to home) but still not something we felt comfortable taking on for our first flip. The other had tenants that were questionable but we probably should have bid on it and evicted. Next time will get one. Issue here is there are not many showing up every month.
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