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