What about HOA fees due?? I assume they would be junior and would be wiped out.? Am I correct to assume (generally speaking) that you would owe all back due property taxes, but be free of HOA dues if you buy at auction?
Yes, that is correct, but you may find it hard to get the escrow closed without paying back HOA fees. Problem is that despite the fact their lien is wiped out, the associations often fight you. While I think they would ultimately lose, it’s sometimes more expedient to pay. In any case, you’ll need to work it out with your title co, and don’t leave it until the last minute.
I might be on thin ice here, but I believe I recently read something that said that a unit owner’s debt to the HOA is NOT wiped out by foreclosure like traditional junior liens are.? Or maybe this is a “nuance” but what I read was that the HOA debt “follows” the orignial homeowner, and the HOA is free to pursue that homeowner in court.? If I understand it correctly, the new buyer IS NOT responsible, but neither has the foreclosure wiped the original owner’s obligation to the HOA.
Keep in mind that when I say “wiped out”, I am only referring to the junior debts secured interest in the property. With the exception of purchase money loans I see no reason why a junior lien holder can’t continue to pursue the homeowner - it’s a nuance I worry about in the homeowner forum, but not the auction buyer forum as auction buyers aren’t really impacted.
Also, for those outside of CA, it is my understanding that HOA liens in some states can be “super senior” like property taxes. As I recall it requires the CC&R’s which are generally always recorded before (or senior) to any individual home loans, to specifically put future lenders on notice that HOA debts are senior.
See for example: http://www.usfn.org/AM/Template.cfm?Section=Home&SECTION=Article_Library&CONTENTID=9537&TEMPLATE=/CM/HTMLDisplay.cfm
Following a foreclosure, subsequent purchasers and lienholders cannot be subject to personal liability for any delinquent assessments or installments that came due before they acquired title to the property. (Civil Code ? 1466.) A trustee?s sale or judicial foreclosure of the first deed of trust (or other senior lien) will extinguish all assessment liens that were due before the ownership interest was acquired. A person who acquires an interest through judicial foreclosure or trustee?s sale will, however, be liable for all assessments that become due after the date he or she acquired the property interest. (Civil Code ? 1367(a) and Civil Code ? 1367.1(a).)
Does this include IRS liens recorded after the notice of trutees sale. We purchased an auction home with Personal IRS liens attached, dating back to 2005, homeowner then filed Chapter 7, causing trustee to contact IRS for release to sell property, but IRS is now holding us responsible for the payment of the previous owners personal taxes. Is this common procedure??? I hope not or we will see lots of people letting their homes go so someone else can pay their back taxes. They sould be in jail for tax evasion…Any comments?
It depends on whether or not the IRS lien was recorded before or after the date the deed of trust that was foreclosed upon went to sale. If the IRS lien was recorded first then yes, it is a senior debt, and like ALL senior debt it must be paid by the buyer at trustee sale. If it was recorded after the sale it was wiped out… subject, however, to the IRS’s 120 day right of redemption. I’d recommend seeking the help of a title officer or attorney familiar with title issues to review the specifics of your case.