This is truly a question that should be answered by a Real Estate / Foreclosure Attorney. Some of the information you will find and even some of the answers to your direct question may be only partially right or even totally wrong. When you are dealing with buying an asset of this size, spending a few dollars to get appropriate professional advice is probably one of the best investments you can make.
Here are a few things that I know, based on the fact that I have specialized in foreclosures for the past 6 years. Please note, I am NOT an attorney and this is NOT intended as legal advice. Also, the law may have changed since the time that I received any of the below information, so, again, I caution you to speak with an attorney before proceeding.
1. Any lien on the property, filed before the current "first lender" filed their lien, that did not subordinate to the current lender, will not be "wiped out".
2. Property taxes have a super-priority lien position. Any unpaid property taxes will not be "wiped out".
3. IRS liens usually are subordinate to the "first lender". In a foreclosure auction, the IRS will usually have to remove their lien and go after the owner and their other assets. Usually, not always. Make sure if there is an IRS lien on the property that you have clear and full information on that lien.
4. It is difficult, nearly impossible, to do a complete title search on a property before the auction date, as you do not have the social security number of the owner.
5. You will get title through a Trustee's Deed, not a Grant Deed. They have different legal characteristics. You should know the differences.
6. Speak with a Title Officer and find out what type of Title Insurance you will be able to get on a home purchased at auction with a Trustee's Deed. There are limitation on these policies. You need to know what they are and whether you are comfortable with the limitations.
I could go on, however, I think this information provides enough reasons for you to seek appropriate legal advice.
Going to a Trustee Auction with a realtor is not enough. As realtors, we cannot give you legal advice and unfortunately most realtors have no clue about Trustee Auctions. Most realtors, when they hear you are looking to purchase a property at auction, think you are purchasing the property from an Auction House, where the title has already been cleared and you can use conventional financing to purchase the home. This is not the case at the Trustee Auction. There, the rule is, buyer beware and bring cash.
Good luck in your research on this subject and in your quest to find the right house at a great price. Dare to Dream.
Shel-lee Davis, CDPE
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
John & Sarena Villaescusa
In a non-recourse mortgage state, borrowers are not held personally liable for more than the homeâ€™s value at the time that the loan is repaid. The lender may recoup some of its loss through foreclosure. However, the lender may not sue the borrower for additional funds. If the foreclosure sale does not generate enough money to satisfy the loan, the lender must accept the loss.
Each non-recourse state has its own anti-deficiency statutes that prohibit lenders from seeking judgments. In a few cases, anti-deficiency statues do allow lenders to collect a limited amount of money from the borrower (such as the difference between the debt and the fair market value of the property).
Note that in some states (our California is one of them) non-recourse laws apply only to â€œpurchase moneyâ€ loans (i.e. original home loans that are used to purchase property).
Anti-Deficiency / Non-Recourse States
Absolutely agree: u must talk to an attorney, but choose a good one:
''If you find yourself hopelessly confused by all of this, do not despair. The law on foreclosures in California are perplexing and counter-intuitive even to attorneys who specialize in real estate matters''William A. Markham.
Let me know if there is anything I can help.
It can be very rewarding and very dangerous at the same time. Properties in auction are selling â€œAS ISâ€, â€œWhere ISâ€ and â€œWith All Faultsâ€. No guaranties or warranties whatsoever.
There could be some hidden liens, mostly governmental and up to 120 days they can claim it and you will be solely responsible for it as an owner.
Other problem is, that the property could be still owner or tenant occupied and you are on your own to evict them. It could be easy eviction, could be problematic. However, better if you hire a lawyer to handle it for you, with all that forms and paperwork for eviction.
At the same time the upset former owner or tenant can smash up your property with jackhammers, flood intentionally and generally speaking vandalize the property. Or if it is empty for long time, is risky as well. It happens many times. Check the property before going to auction, if you can.
And the auction process in general is a sensitive process, all that biddings and so. Be careful not to overbid. Donâ€™t show to anybody all your cashier checks, you donâ€™t want your competition to know about your max. buying power ( your money I mean). Get checks with large and small amounts. Let say you are buying for $670K. You can have a check for $500k and few $100K and $50k and $25K.
Because if you got two $500K as an example, then you have to wait for several weeks to get the difference back from auctioneer.
Summarizing: if inexperienced, go there with an experienced friend or better with a professional real estate agent, experienced in auction sale.
(818) 281- 5889
The IRS takes first place in a situation like this and will be paid first, followed by Sr.loan and the remainder. Often some of the Jr. possition lenders do not get paid.