CA foreclosure question and FTB tax lien

Foreclosure Investing
1

I am new to this foreclosure process. Any help would be appreciated. A home was foreclosed on. The county court house steps brought a few buyers including an institutional investor who was the high bidder. There is now a “secondary auction” where a owner occupied buyer is able to outbid the previous bidder/winner as long as they certify they will occupy the home for a year and have the cash to close this sale. There is an existing FTB lien on this property. Apparently if the owner occupied buyer purchases them home the FTB would have 120 days to either request the lien be settled by the new owner (perhaps negotiate it?) or “take the property” and reimburse the owner occupied buyer their purchase price. Is this correct? I am curious how this process works. Also, is there any truth or chance that the FTB would simply not lay claim to this lien after 120 days it it simply “goes away”? Thanks

2

A few thoughts for you…

  1. If the lien was recorded before the mortgage that was foreclosed on it will have to be paid in full regardless. Only junior liens (those recorded after the mortgage) are wiped out by the foreclosure process.
  2. The only lien I’m aware of having a 120-day right of redemption after foreclosure are federal IRS liens. See https://www.irs.gov/irm/part5/irm_05-012-005r#:~:text=The%20time%20period%20for%20a,the%20government%20and%20the%20taxpayer. I’m not aware of any similar right for the California Franchise Tax Board.
  3. If they do have the right of redemption, I believe it is unlikely it will be exercised from personal experience. I’ve purchased 6-10 properties with IRS liens over the years and have never had one redeemed. I actually inquired with the IRS about this at one point and the group that was responsible said they simply didn’t have a way to fund the purchases. I thought there was business potential in partnering with the IRS to provide the funds while paying the IRS a slightly higher price so that they could reclaim some of their losses. Unfortunately, large government agencies are not very open to such things. :wink:
3

Thank you Sean. Very helpful.