Which liens survive foreclosure?

Foreclosures
15yFollow

Which liens survive foreclosure?

Josh D.
Tampa, FL · Member since 2009 · 76 posts · 21 votes

I'm looking to bid on some properties at the foreclosure auction (Florida). Someone told me if a junior lien holder is not named as a defendant in the foreclosure final judgment then their lien could survive the sale and I could potentially buy a property that still has a 2nd mortgage attached to it.

Does anyone know if this is true?

Thanks in advance!

0Reply
130 views

Most Popular Reply

Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
15y

Most auctions are overrated. You would do much better associating with power REO brokers and making low offers on properties with clean titles already that you can close quick.

Podcast Guest on Show #47
NNN Invest53 Reviews
WebsiteView Page
3Reply
See this reply in the discussion

22 Replies

Jump to latestLatest
  • James Mikel
    Real Estate Investor · Dunnellon, FL · Member since 2009 · 24 posts · 33 votes
    15y

    It could happen but have never seen it as there are fail safes in the system of bringing a property to auction. In the process a O&E report will have been completed to establish all known interest holders in the property and an Affidavit of Diligent Search prepared and submitted to the court. I have numerous pages of information dedicated to superior liens and encumbrances on my site

    Watch Out: Is the foreclosure being brought forward for the nonpayment of mortgage or that of a lien placed against the property. There is a huge difference in the order of superiority between the two. I.E. Foreclosure is due to nonpayment of a HOA lien, then there will bad days ahead if you win the bid and there is a mortgage on the property as all mortgages recorded prior to the lien are superior. There are a lot of condo association liens being foreclosed right now and the winning bidders are crying foul, in many cases, as they believed it was a foreclosure of mortgage. One person I spoke to lately paid 40k for a condo at Dade County forelcosure auction but later found there was a $240k+ mortgage to repay.

    2Reply
  • Josh D.
    OP
    Tampa, FL · Member since 2009 · 76 posts · 21 votes
    15y

    The property I'm looking at had an 80/20 with the same lender. The 80% lien was recorded the same day but on a lower page number in the official records. My RE attorney told me it was thus superior to the 20% loan that was recorded on a bigger page number the same day. In the final judgment the 2nd lien holder (is likely owned by someone else now) was not named as a defendant. A younger less experienced attorney told me today that lien holders not named as defendants can survive a foreclosure.

    I'm calling another more experienced attorney tomorrow to see if that is indeed true. I think I'm going to have my RE attorney heavily involved in my first few auction transactions so I don't' make a $50K mistake.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    15y

    Most auctions are overrated. You would do much better associating with power REO brokers and making low offers on properties with clean titles already that you can close quick.

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    3Reply
  • Scott Schultz
    Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
    10y

    the best deals i have gotten were Sheriff Sales, 6 to this point. all amazing bargains. 

    1Reply
  • Account Closed
    Real Estate Professional · Dayton, OH · Member since 2015 · 423 posts · 187 votes
    10y
    If the property goes through sheriff's sale, the liens should be wiped out. The only way one wouldn't is if it wasn't listed. You can still have a title search done and get title insurance on the property. Check the terms of sale with the sheriff, too. If the sheriff guarantees clear title, you may be able to get your deposit back if your title search shows otherwise.
    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    In FL there are no title guarantees with foreclosure auctions, it's buyer beware and know what you're doing. HOA debts survive. If the second Mtg wasn't named/served it does survive, however you don't have to do a total reforeclosure....there's a process to reopen and amend the foreclosure, removing the second.

    0Reply
  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    10y

    ask the auctioneer and trustee about the chain of title before the sale and at the court house steps. 

    0Reply
  • Paul Sorgi
    Real Estate Investor · Abington, MA · Member since 2011 · 356 posts · 114 votes
    10y

    I didn't see it mentioned but IRS Liens might survive.  I know they do in PA county tax sales.   

    1Reply
  • Account Closed
    New Bern, NC · Member since 2015 · 36 posts · 12 votes
    10y

    Typically if the auction is held properly junior liens will be wiped from the property title (not from the borrower being foreclosed on...but the property)

    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

    Typically, Federal, State, Utility, and Child Support liens will survive.


    Always consult and attorney, but this is a good rule of thumb.

    1Reply
  • Benjamin Cowles
    Cape Coral, FL · Member since 2008 · 469 posts · 32 votes
    10y

    how is it determined if a lien or mortgage gets wiped out or left with the property

    0Reply
  • Scott W.
    Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
    10y
    Originally posted by @Account Closed:

    Typically if the auction is held properly junior liens will be wiped from the property title (not from the borrower being foreclosed on...but the property)

    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

    Typically, Federal, State, Utility, and Child Support liens will survive.


    Always consult and attorney, but this is a good rule of thumb.

     this makes absolutely no sense about the child support liens surviving.  maybe they are paid out if there's any profit remaining. but to stick a bank/investor for some parent that can't pay $25k, well, if that were the case, banks would be out of business. :) 

    0Reply
  • Scott W.
    Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
    10y
    Originally posted by @Joel Owens:

    Most auctions are overrated. You would do much better associating with power REO brokers and making low offers on properties with clean titles already that you can close quick.

    @joel owens  120% false. some of the best deals are at the sheriff sale.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    Scott every area is different with process and available product. My response was from over 5 years ago.

    Different time then when REO brokers carried a lot of inventory. Most lenders these days like short sales over foreclosing.

    In my area the courthouse steps every property the lender almost starts at close to market value or it gets bid up.  

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    0Reply
  • Silvana Elejalde
    Hollywood, FL · Member since 2016 · 14 posts · 3 votes
    9y

    Looking at a bank auction in Florida. Property also had a HOA auction which was already sold 12/20/16, actually went back to HOA for $1,700. In this case, I assume HOA will try all means to collect its monies from future property owner resulting from bank foreclosure sale. Any idea if by HOA being current owner holding Certificate of Title due to HOA auction sale with amount $ 1,700, if they are legally entitled to pursue collection of amounts shown in actual final judgement of HOA foreclosure which was $ 10,336, meaning to collect such monies from future winner of bank auction?

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    9y

    @Silvana Elejalde Yes, the uncollected hoa balance survives, and they will collect.  Also check for back taxes.

    0Reply
  • Silvana Elejalde
    Hollywood, FL · Member since 2016 · 14 posts · 3 votes
    9y

    Thanks Wayne! That's what I thought and I included the $ 10,336 provision in my numbers.

    Yes, always checking on back prop. taxes as well.

    I noticed IRS tax liens sometimes get paid by owners before going to auction, and the payment does not seem to include interests. Does the IRS not collect any interests? Do you have any info on this? I found other auction cases with IRS tax liens, just including the original lien amount in my provisions...

    0Reply
  • Ryan Stocker
    Member since 2019 · 3 posts · 0 votes
    7y

    So if you win a hoa foreclosure auction do you get to pay the back mortgage to stop the banks foreclosure or do you have to pay the total amount owed on the house in a lump sum?

    If you do get to pay the back mortgage, after that is paid do you sign a new contract with the bank or do you have to pay the monthly charges the previous owner agreed to?

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Ryan Stocker No, the bank won’t let you just pay the amount in arrears....the borrower is no longer the owner, you’ll have to pay the loan off in full.

    0Reply
  • Ryan Stocker
    Member since 2019 · 3 posts · 0 votes
    7y
    Originally posted by @Wayne Brooks:

    @Ryan Stocker No, the bank won’t let you just pay the amount in arrears....the borrower is no longer the owner, you’ll have to pay the loan off in full.

     Oh wow that's definitely something  that the state should  have to disclose. Is there anyway to find out how much is still owed on the mortgage  by chance?

    Also could you take out a second mortgage? Is there anything  that would  hold you back from doing  that?

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Ryan Stocker You would need to refinance it, with another mtg.  And no, that’s not “something the state should reveal to you”....foreclosures are not meant to be vehicle for buying free and clear properties by the public....it is simply the legal process by which an hoa or bank enforces their lien.....if you join in the process, it is up to you to figure out the implications and risk.

    2Reply
  • Ryan Stocker
    Member since 2019 · 3 posts · 0 votes
    7y

    Ok so if you were looking to live in the house I guess this would be a good route to go but I cant think of any other reason it would be a good options. @Wayne Brooks Any other reasons I am over looking. 

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Ryan Stocker I don’t see why wanting to live in it would make any difference, except that maybe you’re willing to pay closer to full value if it’s a house you’d Want to live in.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free