Sheriff Sale Judgment Question for Seasoned Investor

10 Replies

If there is an open judgment against an estate that lost the property through Sheriff Sale, does that need to be paid by the winning bidder in order to obtain clear title? The judgment was filed before the foreclosure. I was told as long as service was made to the maker it would be divested. Just concerned because of filing order. Any input would be appreciated!

@Kanus "the judgment was filed before the foreclosure"

If the judgment was recorded before the foreclosing lien was recorded, then most likely the judgment will stick. 

Originally posted by @Virs Esar :

@Kanus "the judgment was filed before the foreclosure"

If the judgment was recorded before the foreclosing lien was recorded, then most likely the judgment will stick. 

 

Huh? There is no such thing as a "foreclosing lien" that I'm aware of. The "lien" was established when they originally did the loan. I believe the OP is referencing some other non foreclosure related judgment against the estate that attached to the property prior to the foreclosure. If that's the case, that judgment goes away once the foreclosure sale has been held and either reverts back to the beneficiary or goes to the successful 3rd party bidder. If the OP means the judgment awarded to the foreclosing entity as a result of foreclosure, that judgment is against the borrower to proceed to foreclosure sale. Maybe I'm missing something here.

I realize every state is different so maybe this is a PA law issue or more about filing order but anyway, I will clarify.

The foreclosing lender has the first lien position. They filed for foreclosure when the owner died and obviously stopped paying the mortgage. There was a separate unrelated judgment filed against the estate BEFORE the lender filed the foreclosure. I'm not sure if date of filing has anything to do with this or not. My take is that the lien is JUNIOR to the mortgage since lien position is based on date of recording not judgment filing. As long as the lien holder was served, I believe it gets divested. Just looking for input.

What confused me was, I was told by another source that since the unrelated judgment was actually filed before the foreclosure, it survives the sale.  I am the successful third party bidder. The judgment is not big enough to hurt so I bid anyway. I just would like to know for future sales. Thoughts?

whatever you paid for it at the the sheriff sale is what you owe. now the previous owner will pay more as there were more costs from when the sale took place until you (the new oner confirmed it).

bottom line, you only owe what it sold for at auction. if there are surviving liens (like a mechanic's lien or any outstanding water bill), then you would most likely owe that.  you obviously still owe for property taxes as you do not get a credit from the bank.

The “filing order” of the judgment before the filing of the foreclosure is irrelevant as the Mortgage lien was years earlier, which is what matters. Whoever told you that “filing order” was a problem doesn’t understand the basics.
Do verify though that the judgment holder was named/served in the foreclosure though.....if not, that would be a problem.

@Michael Knaus

Hard to say for sure what happens here without looking at the documents. But the basic rule in Pennsylvania is "first come, first serve." In case of mortgages, what counts is not the foreclosure action but the date when the mortgage got recorded. So here, the foreclosure sale probably divested this judgment against the Estate. 

You should note, however, that some liens and claims can have priority over an otherwise senior mortgage lien. Some liens (e.g. IRS liens) do not have priority but require very specific steps to get rid of.  

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

Originally posted by @Michael Knaus :

I realize every state is different so maybe this is a PA law issue or more about filing order but anyway, I will clarify.

The foreclosing lender has the first lien position. They filed for foreclosure when the owner died and obviously stopped paying the mortgage. There was a separate unrelated judgment filed against the estate BEFORE the lender filed the foreclosure. I'm not sure if date of filing has anything to do with this or not. My take is that the lien is JUNIOR to the mortgage since lien position is based on date of recording not judgment filing. As long as the lien holder was served, I believe it gets divested. Just looking for input.

What confused me was, I was told by another source that since the unrelated judgment was actually filed before the foreclosure, it survives the sale.  I am the successful third party bidder. The judgment is not big enough to hurt so I bid anyway. I just would like to know for future sales. Thoughts?

 I wouldn't follow the guidance of that other source any more if I were you. Either you misunderstood what they said or, they didn't have a clue what they were talking about. The foreclosing entity wipes out any liens behind them (Behind their lien from date of recording) and is subject to any liens in front of them. "Behind" and "In Front" are time references.

So, for example, if it was a Medicaid lien, then that is one that i believe would take priority over the mortgage. If it is a lien from some HOA, then in PA six months of HOA fees would be due. So as @Chris K. pointed out, the actual documents could affect whether the lien survives the foreclosure.

Thank you all for responding. It is a "claim against the estate" . Upon reading the docket, the estate was served notice but the creditor was NOT. It looks like credit card debt from Sears.

@michael Knaus. If the creditor was not served with notice then the lien will survive the sale. However, there is a PA rule of civil procedure that allows you to file a motion to attempt to divest the lien in this situation. PaRCP 3135(c).

You would have to weigh the cost of doing that vs the cost of paying the creditor. In these situations I would reach out to the attorney for the creditor and see if you could strike a deal.

Good luck.

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