Which liens survive foreclosure?

16 Replies

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!

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.

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.

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.

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

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.

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.

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

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

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.

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

Originally posted by @Sarah Afflerbach:

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. :) 

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.

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.  

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?

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

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...

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