Buying at the courthouse steps in NC

13 Replies

As you can see, could not sleep well tonight...

I had been working with a seller for a home in the Charlotte area on purchasing her pre-foreclosure.  She ended up missing a hearing and was promptly scheduled for auction very quickly.

At this point, if I want to purchase the home, it will have to be at the courthouse.

I don't see any other mortgages on the title or code violations but I am sure my simple searches do not cover all of the possible pitfalls.

Woudl all liens be extinguished once I purchase the purchase the property?

I purchased a foreclosure in Mecklenburg county on the courthouse steps. I had to take care of all of  prior years taxes prior to being issued the deed. It was an easy process other than constantly checking to see if there was a upset bid. 

Hi Jorge,

Unfortunately, if the property is going into foreclosure for a mortage lien then lien survivability may allow any other liens to survive . This is because only the mortgage is being satisfied with the foreclosure. 

Please keep in mind that liens stay with the property.

Often times you are able to call and negotiate payment or other options with the lien holders.

I hope the information provided helps.

@Kimberly Logan

"Please keep in mind that liens stay with the property" - This is not true.  

If you purchase a property at a foreclosure auction and later find that there is a government lien or lien that survives the foreclosure auction, you will be responsible and indebted. Once the Certificate of title (in FL) or Sheriff's Deed or Trustee's Deed (name depending on state) is recorded and the parties of interest (lien holders) are notified, you will be on the hook.

Typically, if you purchase a foreclosure auction property and contact the entity holding the lien and explain the situation they may reduce or strike off the foreclosure-lien held against the property. As a new investor, if you find yourself in this situation, it is recommended hiring a representative to negotiate the lien if it is federal, it could actually save you money.

Here are some of the liens that survive the foreclosure sale:

Government Superior Foreclosure-Liens:

  • 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

Frequent Superior Foreclosure-Liens:

  • HOA or condo fees
  • 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
  • City for road improvements, maintenance

Here are some of the judgment and liens that will be wiped off from the property (not the borrower who lost the title) if the lien holders were properly notified and "had the right to bid on the property at the auction":

  • 2nd and junior position mortgages, such as home equity loans, etc...
  • Credit Card Judgments recorded after the foreclosing mortgage
  • Personal Judgments recorded after the foreclosing mortgage
  • Mechanic's Liens recorded after the foreclosing mortgage

Seems to be a difference of opinion on what survives a NC foreclosure.  Since NC is a non-judicial foreclosure state and FL is a judicial foreclosure state, could this account for the differences of opinion?

Appreciate feedback on this because I have a friend who recently went under contract with a lender on one of their REO properties. After completing title work, the property showed that there was a 2nd place mortgage still attached to the property. Since this mortgage was substantial, my friend walked. In FL, from my understanding, junior mortgages are wiped out at foreclosure, but I'm guessing this is not the hard and fast rule in NC?

Judicial/Non judicial does not impact lien wipe outs in a foreclosure sale. Liens in front of the foreclosing entity survive. Liens behind the foreclosing entity are wiped out, unless those liens are super liens (As described in previous posts).

Thanks, Ron S.  Assuming my friend's title agency is correct that the second mortgage was still attached to the property, how did this happen?  Was it simply a clerical error of the foreclosing documents?

Originally posted by @Beau Miller :

Thanks, Ron S.  Assuming my friend's title agency is correct that the second mortgage was still attached to the property, how did this happen?  Was it simply a clerical error of the foreclosing documents?

 I'm also interested in this answer. I attended my first trustee sale last week and was told by an employee junior liens would transfer with the property. My understanding is what has been said already in this thread...only super liens transfer.

Thanks for everyone's input!  BP rocks...

Turns out that my concerns are completely addressed by the upset period.  I was so worried that the property would go to auction and I would just lose it.  Now I have the upset period time to check the title.

Thanks again for all of your input.

Thank you everyone for your feedback.

I have researched this topic and referenced this topic with court officials and real-estate attorneys; however, I will definitely research this topic even deeper and try to have answer by the end of today.

Kimberly-Were you able to find out if 2nd mortgages, equity lines, mechanic liens etc. are cleared after the trustee sale transaction has completed in North Carolina?  Can anyone else confirm this?  

Thanks for the info  

Yes, all junior liens, judgments, deeds of trust are extinguished by a foreclosure of a deed of trust, if that DT were recorded first. NC is a "pure race" state ("race to the courthouse" for priority) so one only need look at the order of recordation. If your DT was recorded first then it extinguishes anything recorded after it (mechanics liens are a little different if the lien reflects that work was done prior to the recordation of the foreclosed deed of trust, then it may not be extinguished. Consult a real estate attorney to help you with that specific issue). Naturally, as was discussed earlier, property taxes, water/sewer will also need to be paid (not extinguished) and possibly any IRS liens depending on when filed and what notification was given it during the foreclosure.

Problem with NC is the up set bids. To hard to buy multiple properties. Here  in SC you get everything that is attached to the property. So always makes sense to have some one pull title in both states to see what you dealing with you. We paid $150 a house but that saved us a lot of head aches.

Just my two cents

I started my REI career trying to do NC courthouse auction bids, and the insane 10 day "upset bid" period makes it dangerous to go after multiple properties. And it quickly gets old running back to the courthouse every few days... I finally just gave up and successfully pursued other property acquisition methods. But I may decide to bang my head up against this wall again at some point in the future, when I have a better system working around me and more cash.