On your first question...I'd suggest asking that question of a real estate attorney. In my experience, the seller (the bank) pays the liens. Liens on the property filed after the closing could become your (the new buyer) responsibility. In my experience, the committment of the title insurance company comes into play in a situation such as this.

On your second question, Have you talked to your buyers' agent about the need for a 203K loan for the home you are thinking of buying? There are definitely certain items that could be cited by the appraiser that would not allow for FHA financing unless they were repaired/corrected usually by the seller prior to closing or unless there is the FHA 203K loan along with your FHA loan so that you could repair/correct the problems after closing. Depending on the condition of the home, you might want to ask your buyers' agent to include in your offer and amount of money to be paid by the seller for lender required repairs.

Liens can come in many forms, but this is one reason for a title search and language in the contract stipulating that you can cancel the purchase if the title company finds such liens which you don't want to deal with. I believe that only liens which are properly recorded at your county courthouse can be charged against a sale, however, the title company's attorney and the closing attorney should be able to answer those questions more precisely for your particular case. Sometimes banks will clear up title issues at their expense prior to a sale, and sometimes its up to the purchaser, but I wouldn't think you'd want to complete a purchase without clear title. Also, if the property was foreclosed (in Alabama) more than a year prior to your completing your purchase, the right of redemption has passed, and most likely the liens are null and void. The original foreclosure deed will usually establish the date from which the one year period runs.

Purchases don't happen without financing. The stronger the financing, the more likely your purchase will close. The bank wants the property off their books, so if they are more confident that the sale will close, they will likely be more willing to deal, but not necessarily. A 203K loan will allow for repairs, and most foreclosures need them due to neglect. FHA has gotten especially picky about things like flaking paint, so if there is financing available for repair funds, this can help to close the loan. There are many rules to follow when doing such a loan and your lender should give you insight as to whether you and the subject property will meet them.

FHA 203 loans are FHA loans that have money built into them for repairs. There are different kinds depending on how much work needs to be done. There are some restrictions and guidelines that go with them so talk to your lender about which one would be best.

As far as the liens goes, the bank is a lien on the property. They are only responsible for themselves. One of the drawbacks on a foreclosure is that the buyer may be responsible for any outstanding liens, back taxes or city inspection issues that may be on the property.