Time to take the Chief Title Officer at your local title company to lunch… or consult an attorney.
Are property taxes considered IRS taxes and subject to the 120 day right of redemption even if they have not been recorded?
No, they are always senior and all past due property taxes must be paid by the buyer at auction.
Should I assume that the published bid has included the delinquent property taxes even if they have not been recorded as a lien at the county?
No, they are never included and like ALL senior liens will remain due if you win at auction. You can find the amount by inquiring with the county tax collectors office. Most tax collectors have an online interface to lookup past due taxes using the APN (which we show in the Location panel).
Dear Sean. Would you please list the leins that will be wiped out in trustee sale and the ones that will not .in an #'d item form. as well as the leins that will and will not be wiped out in case of forclosure .what i learned from you all is wiped out in forclosure .
Thank you, neptune
It isn’t an issue of type, but position. With rare exception junior liens are wiped out, senior liens (recorded before) are not. The main exception is that the IRS has a 120 day right of redemption. Junior mechanics liens may have the ability to collect in limited circumstances as well.
While Sean and others have made mention of the occasional problems that arise from junior HOA liens … I’d like to share what I learned from a veteran steps investor. There are certain HOA collection agencies that take over collection from delinquent homeowners and simply refuse to remove the lien after a steps sale is made to a third-party investor. Even though the law in CA technically wipes out a junior (and 99% of liens junior to foreclosing loan) HOA lien, the mere fact that the collection agency refuses all requests to remove the lien can create real problems when attempting to re-sell the property. The lien clouds title making it difficult, if not impossible, for the steps buyer to re-sell the property. Hence, many steps buyers simply choose to payoff the HOA lien even though they may not be legally obligated to pay it off.
Has anyone out there had any success in getting an HOA collection agency (e.g. Pro Solutions) to remove an HOA lien after the subject property has gone to steps sale? Seems almost criminal for such HOA collection agencies to ignore the law by keeping such (theoretically wiped out) liens in place. Effective extortion it is.
Danny - note that the lien doesn’t technically have to be “removed”. For example 2nd mortgages that are wiped out by a 1st mortgage are never reconveyed. The only issue here is whether or not you can get the title company to insure around it. This is usually easier if the lien was recorded prior to the sale date. Harder if after because the title company can’t tell whether or not is a lien for services before the sale (which you aren’t responsible for), or after (which you are). Secondarily you may have to deal with getting them to stop their debt collection. On that front, I’d suggest the Fair Debt Collection Practices Act http://www.ftc.gov/os/statutes/fdcpajump.shtm. As you mentioned, I have had ones that have been just easier to pay, I just wanted to make sure everyone was clear that the right place to start is with trying to get the title co to insure around it.
Thanks! … very helpful and important clarification.
When buying at the trustee sale the best advice for this type of question is always have your title insurance rep which is actually gonna be working with you anyways to record/transfer title for you, To check the title record on subject property for any future problems w/liens on that property before you make that bid at the court house.
Regarding the topic of pecking order and subordination agreements… Do the subordination agreements have to be separately recorded or do can they be contained within the recorded trust deeds? Can you just scan the recorded files database and conclude pecking order without reading actual documents?
Hi Vinay, The subordination agreement is a separately recorded document that references the Deed of Trust that is subordinating.
If I buy the 1st deed of trust at auction, and later found out that there were some claims to title that dated prior to the first DT. Since the first DT would have had a title insurance written for it when it was originated, would, I, as a buyer of such lien, also inherit such title insurance from the former lender?
No, you are not a party to the insurance policy and do not “inherit” it. That said, I’d recommend opening escrow with the same title company that insured the “1st” originally when you go to resell or get a loan on the property. A few possibilities: 1) they may rely on their prior underwriting and not look back further thus issuing you new title insurance, 2) they may have something in their prior title work that proves the claims are invalid and therefore will be willing to insure, or 3) they are going to have to really think about what to tell you regarding their prior mistake.
Wow Sean! Thank you so much! You are a veritable fountain of knowledge! I am reviewing for my Arizona Real Estate Sales License and stumbling upon this site has been very beneficial to me! I definitely plan to visit this site on a regular basis. Thanks again.
I just bought a property in TX from a Constable Sale auction county court for HOA’s lien. The previous owner still have an outstanding mortgage. What would happen now? does this Constable’s sale wipe out all the mortages ?
Each state has different foreclosure laws. I don’t know about Texas, but I would highly doubt that the sale of the HOA lien would wipe out the the mortgage. Most likely, you simply now own a property with a mortgage already on it. And the lender may have already filed foreclosure as well. But hopefully someone here with knowledge specific to Texas will chime in. In any case, you should probably speak to a good lawyer familiar with foreclosure/real estate law to see what options you have. Good luck!
HOA Liens recorded after the Ist mortgage stands as a Junior Lien & if you buy a a junior lien, other Senior liens, if any will still exist. You don’t have to pay them but they can foreclose the property & when you resell the property they will have to be paid to close the property
Hello Sean,
My husband and I have an opportunity to purchase a home at trustee’s sale on November 7, 2011. We actually did a market analysis to see if it was a good investment. The paper stated the opening bid is $119,000 and the house is worth between $170,000 and $180,000. The 1st has foreclosed on the house for the $119,000. We contacted the owners to see if we offered them cash with an extra $10,000 before going to auction if they were interested. Found out through them that they also owe a 2nd of $100,000. We have a hard money lender willing to lend us the money with 7% interest for five years until we told him we would have to buy it at auction. He said he would never lend for an auction purchase because too many things can go wrong. He said you can’t buy title insurance on the house to guarantee the junior liens wouldn’t have rights. I was under the impression, the 2nd will be wiped out, correct? Tri-Counties bank holds the 2nd and has not foreclosed on the property. Am I not able to do a preescrow title search and then purchase title insurance? He would rather I talk the sellers into a short sale which means we are going to pay a much higher amount most likely. Can the 2nd come back later and sue us if we were to purchase the property at auction and would my title insurance protect us from that? By the way, we are in Northern Calfornia!
Thank you,
Sandy