Judicial Forclosure: How Verify JR Lienholders Served

5 Replies

Question for all you foreclosure buyers out there: How do you conduct your due diligence to make sure all the junior lien holders have been properly notified/served in the case of a judicial foreclosure proceeding?

Apart from reading/verifying the defendants named on the the general judgement filed with the courts and recorded with the county, is there more investigating I should be doing to verify the defendants listed on the judgement were properly served? Is there any way to check what they were served?

Regarding due diligence with the owner, should I be checking newspapers to ensure that the owner has been properly notified?

I responded to your other post.. for me as long as I know its a first I don't do anything else personally.

I have never had a junior come back and bite me other than one time when a first got accidently released ( at least that's what wells said in their complaint..) and we actually bought the second.

after 10k or so in legal fee's we all settled so it was a break even or maybe I lost 5 or 10k can't remember but that's the only time I had an issue.

if the junior is not notified I suppose they can redeem but I suspect they would have to pay you off and maybe some statory interest kind of like if the IRS redeems which I have never seen happen and I know I have bought at least 50 with IRS leins over the years.. those were my favorites.. most people won't bid as they are afraid of them.. plus they need to run right away and put their HML on it.. and can't do that with IRS lien.. I got some smoking deals with those just wait the 120 days and your ready to go.

Watch out for IRS liens in non-judicial foreclosures in states such as NC even if the IRS lien is Junior. 

"To the extent provided by state law, property is discharged from the tax lien when the holder of a superior encumbrance forecloses non-judicially under IRC 7425(b)(2) and properly notices the IRS"

The problem is finding out if the holder of a superior encumbrance has properly noticed the IRS.  I never had good luck with just calling them to send me the notices. I have to go through an attorney to do this..

Originally posted by @Virs Esar :

Watch out for IRS liens in non-judicial foreclosures in states such as NC even if the IRS lien is Junior. 

"To the extent provided by state law, property is discharged from the tax lien when the holder of a superior encumbrance forecloses non-judicially under IRC 7425(b)(2) and properly notices the IRS"

The problem is finding out if the holder of a superior encumbrance has properly noticed the IRS.  I never had good luck with just calling them to send me the notices. I have to go through an attorney to do this..

 The IRS is never junior. Assuming proper notice to the federal taxing authority, they are always senior with right of first refusal that will expire in approx. 120 days if not exercised.

Thanks! Does that mean even after the 120 day IRS redemptive period, IRS liens remain with the property and must be settled at sale?

Originally posted by @Hanna Brown :

Thanks! Does that mean even after the 120 day IRS redemptive period, IRS liens remain with the property and must be settled at sale?

 No. Sometime prior to 120 days, (hopefully) someone (you? Lender? New Owner?) will reach out to the IRS to see if they are going to redeem their lien or abandon it and, obtain the abaondonment documentation to clear title up.

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