Mechanics Liens, purchasing a partially completed home at Trustee Sale


#1

I am considering buying a partially completed home at a trustee sale.? The title report states several significant liens by subcontractors that I am assuming are junior to the construction loan.? Would I be responsible for paying these liens back if I were to purchase the property?


#2

Wow Elizabeth, that is a very interesting case. I would assume it would wipe them out, but my understanding is that mechanics liens have been allowed to stand in certain circumstances if the work was considered to have benefited the lender. I would likely discuss this with a title company. Specifically ask if they would be willing to issue an owners policy after the sale, and if not why.


#3

Elizabeth - Never assume a recorded Mechanics’ Lien is junior to a Deed of Trust merely because the involuntary lien (Mechanics’ Lien) recorded subsequent to the voluntary lien (Deed of Trust). Mechanics’ lien law is very complicated. If, for example, there was a “pre-start,” i.e., work commenced prior to the recordation of the Deed of Trust, then it’s likely that all subsequently recorded mechanics’ liens have priority over the defaulted Lender’s lien. That goes above and beyond the liens you’re seemingly already aware of. Even if one was inclinded to cure the existing mechanics’ liens, other liens could still pop up (read: record) at a later date and attach to the property. An action to foreclose any of those liens (Lis Pendens) could be filed and, if successful, could wipe out any financing you may have placed on the property (upon acquisition). Be cognizant that foreclosures are risky enough business. This, without the ultra-hazardous risk of ongoing construction, which is fraught with even more peril…