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Which liens are not wiped out at the Trustee Sale ?

If the 1st mortage lender is doing the foreclosure, exactly which liens are not wiped out? Is the winning bidder now responsible for paying them ? How soon do they have to be paid ? Is it possible that a lien gets recorded in between the time of a preliminary title report and the auction ? Would title insurance protect  against such a case ? Sorry for asking many questions if you don't mind :-)

TnMan2

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Let me start by saying that there are some nuances that chief title officers still debate, but let me try to give you a framework to work from.
The basic concept underlying all of this is that when a lender makes a loan, secured by the property, they shouldn't become responsible for loans that occur later on. That simple rule frees the homeowner up to take additional loans without having to ask the earlier (or "senior") lenders for approval. In exchange later (or "junior") lenders understand that if the senior loan forecloses the senior lender is not responsible for insuring they are repaid.
The next thing to understand is that this pecking order is simply based on the order in which things are filed at the county, by date and document number. It really doesn't matter what the documents say - I have seen deeds of trust (the document recorded for a loan in CA) labeled as 2nd mortgages that were actually in 3rd position. The only thing that can change this order, is a subordination agreement - which essentially sets forth that a loan recorded earlier agrees to be junior to a loan recorded later.
Now a couple of additional things to note: property taxes are always senior. IRS liens that are junior are essentially wiped out but they have a right or redemption for 120 days (they can buy the home back from you for what you paid, without interest, or repayment of unnecessary repairs). Mechanics liens may have a claim if the repairs were necessary (the theory being that they were in the lenders best interest as they avoided further damage to the secured interest).
Now with those things in mind let's get to your questions. Senior loans (either though date or subordination) are NOT wiped out, and occaisionally mechanics liens (I've never had it happen personally) and the IRS has a right of redemption.  The winning bidder isn't directly responsible for paying senior liens, but if they don't they will lose the home when those senior liens foreclose. Yes a lien may get recorded between the time you do your research and the sale - but it will almost always be junior so it doesn't really matter (I did see a lender record a subordination the day before the sale to try and sucker folks in at the auction - but it was clearly fraudulent and the sale was overturned). I'm not aware of any title insurance products for buyers at auction at this time.
Hope that helps.

Sean OToole
0
Avatar

Let me start by saying that there are some nuances that chief title officers still debate, but let me try to give you a framework to work from.
The basic concept underlying all of this is that when a lender makes a loan, secured by the property, they shouldn't become responsible for loans that occur later on. That simple rule frees the homeowner up to take additional loans without having to ask the earlier (or "senior") lenders for approval. In exchange later (or "junior") lenders understand that if the senior loan forecloses the senior lender is not responsible for insuring they are repaid.
The next thing to understand is that this pecking order is simply based on the order in which things are filed at the county, by date and document number. It really doesn't matter what the documents say - I have seen deeds of trust (the document recorded for a loan in CA) labeled as 2nd mortgages that were actually in 3rd position. The only thing that can change this order, is a subordination agreement - which essentially sets forth that a loan recorded earlier agrees to be junior to a loan recorded later.
Now a couple of additional things to note: property taxes are always senior. IRS liens that are junior are essentially wiped out but they have a right or redemption for 120 days (they can buy the home back from you for what you paid, without interest, or repayment of unnecessary repairs). Mechanics liens may have a claim if the repairs were necessary (the theory being that they were in the lenders best interest as they avoided further damage to the secured interest).
Now with those things in mind let's get to your questions. Senior loans (either though date or subordination) are NOT wiped out, and occaisionally mechanics liens (I've never had it happen personally) and the IRS has a right of redemption.  The winning bidder isn't directly responsible for paying senior liens, but if they don't they will lose the home when those senior liens foreclose. Yes a lien may get recorded between the time you do your research and the sale - but it will almost always be junior so it doesn't really matter (I did see a lender record a subordination the day before the sale to try and sucker folks in at the auction - but it was clearly fraudulent and the sale was overturned). I'm not aware of any title insurance products for buyers at auction at this time.
Hope that helps.

Sean OToole
0
Avatar

Let me start by saying that there are some nuances that chief title officers still debate, but let me try to give you a framework to work from.
The basic concept underlying all of this is that when a lender makes a loan, secured by the property, they shouldn't become responsible for loans that occur later on. That simple rule frees the homeowner up to take additional loans without having to ask the earlier (or "senior") lenders for approval. In exchange later (or "junior") lenders understand that if the senior loan forecloses the senior lender is not responsible for insuring they are repaid.
The next thing to understand is that this pecking order is simply based on the order in which things are filed at the county, by date and document number. It really doesn't matter what the documents say - I have seen deeds of trust (the document recorded for a loan in CA) labeled as 2nd mortgages that were actually in 3rd position. The only thing that can change this order, is a subordination agreement - which essentially sets forth that a loan recorded earlier agrees to be junior to a loan recorded later.
Now a couple of additional things to note: property taxes are always senior. IRS liens that are junior are essentially wiped out but they have a right or redemption for 120 days (they can buy the home back from you for what you paid, without interest, or repayment of unnecessary repairs). Mechanics liens may have a claim if the repairs were necessary (the theory being that they were in the lenders best interest as they avoided further damage to the secured interest).
Now with those things in mind let's get to your questions. Senior loans (either though date or subordination) are NOT wiped out, and occaisionally mechanics liens (I've never had it happen personally) and the IRS has a right of redemption.  The winning bidder isn't directly responsible for paying senior liens, but if they don't they will lose the home when those senior liens foreclose. Yes a lien may get recorded between the time you do your research and the sale - but it will almost always be junior so it doesn't really matter (I did see a lender record a subordination the day before the sale to try and sucker folks in at the auction - but it was clearly fraudulent and the sale was overturned). I'm not aware of any title insurance products for buyers at auction at this time.
Hope that helps.

Sean OToole
0
Avatar

Let me start by saying that there are some nuances that chief title officers still debate, but let me try to give you a framework to work from.
The basic concept underlying all of this is that when a lender makes a loan, secured by the property, they shouldn't become responsible for loans that occur later on. That simple rule frees the homeowner up to take additional loans without having to ask the earlier (or "senior") lenders for approval. In exchange later (or "junior") lenders understand that if the senior loan forecloses the senior lender is not responsible for insuring they are repaid.
The next thing to understand is that this pecking order is simply based on the order in which things are filed at the county, by date and document number. It really doesn't matter what the documents say - I have seen deeds of trust (the document recorded for a loan in CA) labeled as 2nd mortgages that were actually in 3rd position. The only thing that can change this order, is a subordination agreement - which essentially sets forth that a loan recorded earlier agrees to be junior to a loan recorded later.
Now a couple of additional things to note: property taxes are always senior. IRS liens that are junior are essentially wiped out but they have a right or redemption for 120 days (they can buy the home back from you for what you paid, without interest, or repayment of unnecessary repairs). Mechanics liens may have a claim if the repairs were necessary (the theory being that they were in the lenders best interest as they avoided further damage to the secured interest).
Now with those things in mind let's get to your questions. Senior loans (either though date or subordination) are NOT wiped out, and occaisionally mechanics liens (I've never had it happen personally) and the IRS has a right of redemption.  The winning bidder isn't directly responsible for paying senior liens, but if they don't they will lose the home when those senior liens foreclose. Yes a lien may get recorded between the time you do your research and the sale - but it will almost always be junior so it doesn't really matter (I did see a lender record a subordination the day before the sale to try and sucker folks in at the auction - but it was clearly fraudulent and the sale was overturned). I'm not aware of any title insurance products for buyers at auction at this time.
Hope that helps.

Sean OToole
0
Avatar

Let me start by saying that there are some nuances that chief title officers still debate, but let me try to give you a framework to work from.
The basic concept underlying all of this is that when a lender makes a loan, secured by the property, they shouldn't become responsible for loans that occur later on. That simple rule frees the homeowner up to take additional loans without having to ask the earlier (or "senior") lenders for approval. In exchange later (or "junior") lenders understand that if the senior loan forecloses the senior lender is not responsible for insuring they are repaid.
The next thing to understand is that this pecking order is simply based on the order in which things are filed at the county, by date and document number. It really doesn't matter what the documents say - I have seen deeds of trust (the document recorded for a loan in CA) labeled as 2nd mortgages that were actually in 3rd position. The only thing that can change this order, is a subordination agreement - which essentially sets forth that a loan recorded earlier agrees to be junior to a loan recorded later.
Now a couple of additional things to note: property taxes are always senior. IRS liens that are junior are essentially wiped out but they have a right or redemption for 120 days (they can buy the home back from you for what you paid, without interest, or repayment of unnecessary repairs). Mechanics liens may have a claim if the repairs were necessary (the theory being that they were in the lenders best interest as they avoided further damage to the secured interest).
Now with those things in mind let's get to your questions. Senior loans (either though date or subordination) are NOT wiped out, and occaisionally mechanics liens (I've never had it happen personally) and the IRS has a right of redemption.  The winning bidder isn't directly responsible for paying senior liens, but if they don't they will lose the home when those senior liens foreclose. Yes a lien may get recorded between the time you do your research and the sale - but it will almost always be junior so it doesn't really matter (I did see a lender record a subordination the day before the sale to try and sucker folks in at the auction - but it was clearly fraudulent and the sale was overturned). I'm not aware of any title insurance products for buyers at auction at this time.
Hope that helps.

Sean OToole
0
Avatar

I have a lien on someone's property because they owe me money.  How do I know if I am a "junior" or "senior" lien?  and if I am junior and wiped out what is the point of my getting a lien in the first place if it doesn't hold true?

Judy
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I have a lien on someone's property because they owe me money.  How do I know if I am a "junior" or "senior" lien?  and if I am junior and wiped out what is the point of my getting a lien in the first place if it doesn't hold true?

Judy
0
Avatar

I have a lien on someone's property because they owe me money.  How do I know if I am a "junior" or "senior" lien?  and if I am junior and wiped out what is the point of my getting a lien in the first place if it doesn't hold true?

Judy
0
Avatar

I have a lien on someone's property because they owe me money.  How do I know if I am a "junior" or "senior" lien?  and if I am junior and wiped out what is the point of my getting a lien in the first place if it doesn't hold true?

Judy
0
Avatar

I have a lien on someone's property because they owe me money.  How do I know if I am a "junior" or "senior" lien?  and if I am junior and wiped out what is the point of my getting a lien in the first place if it doesn't hold true?

Judy
0
Avatar

Hi Judy, It is based on the concept of "first in time equals first in line". Each document recorded at the county has a date, and a document number. With just a few exceptions documents recorded earlier (lower date and document number) are senior, and one's recorded later are junior. Let's assume there is one mortgage senior to yours, with a outstanding balance of $400,000, and that your lien is for $25,000. If the loan senior to yours begins foreclosure you have some options. If your lien is in the form of a deed of trust you can likely begin foreclosure as well as typically any failure to pay senior debt is an automatic default. To protect your position you have the right to make the payments on the first until you can foreclose and take control of the property (at which time you may have to pay the first off as it likely has a "due-on-sale" clause). Alternatively you can let the first foreclose, attend the auction, and bid the first up at trustee sale until the winning bid is enough to cover your lien (the trustee on the first will pay out any excess proceeds to lien holders in order until funds are exhausted or all liens are paid at which point the remainder goes to the homeowner). If the senior loan sells at foreclosure sale, for less than enough to cover your lien, and you FAIL TO PROTECT YOURSELF, then you are wiped out. Getting to have this option is the reason to file the lien.

Sean OToole
0
Avatar

Hi Judy, It is based on the concept of "first in time equals first in line". Each document recorded at the county has a date, and a document number. With just a few exceptions documents recorded earlier (lower date and document number) are senior, and one's recorded later are junior. Let's assume there is one mortgage senior to yours, with a outstanding balance of $400,000, and that your lien is for $25,000. If the loan senior to yours begins foreclosure you have some options. If your lien is in the form of a deed of trust you can likely begin foreclosure as well as typically any failure to pay senior debt is an automatic default. To protect your position you have the right to make the payments on the first until you can foreclose and take control of the property (at which time you may have to pay the first off as it likely has a "due-on-sale" clause). Alternatively you can let the first foreclose, attend the auction, and bid the first up at trustee sale until the winning bid is enough to cover your lien (the trustee on the first will pay out any excess proceeds to lien holders in order until funds are exhausted or all liens are paid at which point the remainder goes to the homeowner). If the senior loan sells at foreclosure sale, for less than enough to cover your lien, and you FAIL TO PROTECT YOURSELF, then you are wiped out. Getting to have this option is the reason to file the lien.

Sean OToole
0
Avatar

Hi Judy, It is based on the concept of "first in time equals first in line". Each document recorded at the county has a date, and a document number. With just a few exceptions documents recorded earlier (lower date and document number) are senior, and one's recorded later are junior. Let's assume there is one mortgage senior to yours, with a outstanding balance of $400,000, and that your lien is for $25,000. If the loan senior to yours begins foreclosure you have some options. If your lien is in the form of a deed of trust you can likely begin foreclosure as well as typically any failure to pay senior debt is an automatic default. To protect your position you have the right to make the payments on the first until you can foreclose and take control of the property (at which time you may have to pay the first off as it likely has a "due-on-sale" clause). Alternatively you can let the first foreclose, attend the auction, and bid the first up at trustee sale until the winning bid is enough to cover your lien (the trustee on the first will pay out any excess proceeds to lien holders in order until funds are exhausted or all liens are paid at which point the remainder goes to the homeowner). If the senior loan sells at foreclosure sale, for less than enough to cover your lien, and you FAIL TO PROTECT YOURSELF, then you are wiped out. Getting to have this option is the reason to file the lien.

Sean OToole
0
Avatar

Hi Judy, It is based on the concept of "first in time equals first in line". Each document recorded at the county has a date, and a document number. With just a few exceptions documents recorded earlier (lower date and document number) are senior, and one's recorded later are junior. Let's assume there is one mortgage senior to yours, with a outstanding balance of $400,000, and that your lien is for $25,000. If the loan senior to yours begins foreclosure you have some options. If your lien is in the form of a deed of trust you can likely begin foreclosure as well as typically any failure to pay senior debt is an automatic default. To protect your position you have the right to make the payments on the first until you can foreclose and take control of the property (at which time you may have to pay the first off as it likely has a "due-on-sale" clause). Alternatively you can let the first foreclose, attend the auction, and bid the first up at trustee sale until the winning bid is enough to cover your lien (the trustee on the first will pay out any excess proceeds to lien holders in order until funds are exhausted or all liens are paid at which point the remainder goes to the homeowner). If the senior loan sells at foreclosure sale, for less than enough to cover your lien, and you FAIL TO PROTECT YOURSELF, then you are wiped out. Getting to have this option is the reason to file the lien.

Sean OToole
0
Avatar

Hi Judy, It is based on the concept of "first in time equals first in line". Each document recorded at the county has a date, and a document number. With just a few exceptions documents recorded earlier (lower date and document number) are senior, and one's recorded later are junior. Let's assume there is one mortgage senior to yours, with a outstanding balance of $400,000, and that your lien is for $25,000. If the loan senior to yours begins foreclosure you have some options. If your lien is in the form of a deed of trust you can likely begin foreclosure as well as typically any failure to pay senior debt is an automatic default. To protect your position you have the right to make the payments on the first until you can foreclose and take control of the property (at which time you may have to pay the first off as it likely has a "due-on-sale" clause). Alternatively you can let the first foreclose, attend the auction, and bid the first up at trustee sale until the winning bid is enough to cover your lien (the trustee on the first will pay out any excess proceeds to lien holders in order until funds are exhausted or all liens are paid at which point the remainder goes to the homeowner). If the senior loan sells at foreclosure sale, for less than enough to cover your lien, and you FAIL TO PROTECT YOURSELF, then you are wiped out. Getting to have this option is the reason to file the lien.

Sean OToole
0
Avatar

Hello Sean...  I just read your very informative response to the question, Which liens are not wiped out at the Trustee Sale ?.  I am looking at a Trustee's sale Oct 1 on a property owned by people that went bust in a failing restaurant business.  I have checked the recorder's office and found 3 mortgages - the first being the one foreclosed on (senior) and two others.  I am now concerned that maybe there are property liens out there somewhere resulting from restaurant debt lawsuits or equipment agreements, etc.  Would they be wiped out at the sale if not recorded?  Thanks for your insights.... Larry   

Larrygs
0
Avatar

Hello Sean...  I just read your very informative response to the question, Which liens are not wiped out at the Trustee Sale ?.  I am looking at a Trustee's sale Oct 1 on a property owned by people that went bust in a failing restaurant business.  I have checked the recorder's office and found 3 mortgages - the first being the one foreclosed on (senior) and two others.  I am now concerned that maybe there are property liens out there somewhere resulting from restaurant debt lawsuits or equipment agreements, etc.  Would they be wiped out at the sale if not recorded?  Thanks for your insights.... Larry   

Larrygs
0
Avatar

Hello Sean...  I just read your very informative response to the question, Which liens are not wiped out at the Trustee Sale ?.  I am looking at a Trustee's sale Oct 1 on a property owned by people that went bust in a failing restaurant business.  I have checked the recorder's office and found 3 mortgages - the first being the one foreclosed on (senior) and two others.  I am now concerned that maybe there are property liens out there somewhere resulting from restaurant debt lawsuits or equipment agreements, etc.  Would they be wiped out at the sale if not recorded?  Thanks for your insights.... Larry   

Larrygs
0
Avatar

Hello Sean...  I just read your very informative response to the question, Which liens are not wiped out at the Trustee Sale ?.  I am looking at a Trustee's sale Oct 1 on a property owned by people that went bust in a failing restaurant business.  I have checked the recorder's office and found 3 mortgages - the first being the one foreclosed on (senior) and two others.  I am now concerned that maybe there are property liens out there somewhere resulting from restaurant debt lawsuits or equipment agreements, etc.  Would they be wiped out at the sale if not recorded?  Thanks for your insights.... Larry   

Larrygs
0
Avatar

Hello Sean...  I just read your very informative response to the question, Which liens are not wiped out at the Trustee Sale ?.  I am looking at a Trustee's sale Oct 1 on a property owned by people that went bust in a failing restaurant business.  I have checked the recorder's office and found 3 mortgages - the first being the one foreclosed on (senior) and two others.  I am now concerned that maybe there are property liens out there somewhere resulting from restaurant debt lawsuits or equipment agreements, etc.  Would they be wiped out at the sale if not recorded?  Thanks for your insights.... Larry   

Larrygs
0
Avatar

Hi Larry - unrecorded liens are something I haven't had to face yet. My understanding is that as a bonafide purchaser for value, that had no knowledge of the liens before purchasing, you should be protected from claims as you relied on the recorded data, and it was the lienholders responsibility to protect their position by recording their lien. That said, one thing I do know is that anyone can sue you for anything, and in doing so they can tie up the property for a long time by filing a lis pendens. So if you expect trouble on a deal make sure to leave enough room in it to be worth the time and trouble  - I've found that if you plan for the worse, everything usually goes perfect, and if you expect everything to go perfect, you get nothing but trouble. ;-)

Sean OToole
0
Avatar

Hi Larry - unrecorded liens are something I haven't had to face yet. My understanding is that as a bonafide purchaser for value, that had no knowledge of the liens before purchasing, you should be protected from claims as you relied on the recorded data, and it was the lienholders responsibility to protect their position by recording their lien. That said, one thing I do know is that anyone can sue you for anything, and in doing so they can tie up the property for a long time by filing a lis pendens. So if you expect trouble on a deal make sure to leave enough room in it to be worth the time and trouble  - I've found that if you plan for the worse, everything usually goes perfect, and if you expect everything to go perfect, you get nothing but trouble. ;-)

Sean OToole
0
Avatar

Hi Larry - unrecorded liens are something I haven't had to face yet. My understanding is that as a bonafide purchaser for value, that had no knowledge of the liens before purchasing, you should be protected from claims as you relied on the recorded data, and it was the lienholders responsibility to protect their position by recording their lien. That said, one thing I do know is that anyone can sue you for anything, and in doing so they can tie up the property for a long time by filing a lis pendens. So if you expect trouble on a deal make sure to leave enough room in it to be worth the time and trouble  - I've found that if you plan for the worse, everything usually goes perfect, and if you expect everything to go perfect, you get nothing but trouble. ;-)

Sean OToole
0
Avatar

Hi Larry - unrecorded liens are something I haven't had to face yet. My understanding is that as a bonafide purchaser for value, that had no knowledge of the liens before purchasing, you should be protected from claims as you relied on the recorded data, and it was the lienholders responsibility to protect their position by recording their lien. That said, one thing I do know is that anyone can sue you for anything, and in doing so they can tie up the property for a long time by filing a lis pendens. So if you expect trouble on a deal make sure to leave enough room in it to be worth the time and trouble  - I've found that if you plan for the worse, everything usually goes perfect, and if you expect everything to go perfect, you get nothing but trouble. ;-)

Sean OToole
0
Avatar

Hi Larry - unrecorded liens are something I haven't had to face yet. My understanding is that as a bonafide purchaser for value, that had no knowledge of the liens before purchasing, you should be protected from claims as you relied on the recorded data, and it was the lienholders responsibility to protect their position by recording their lien. That said, one thing I do know is that anyone can sue you for anything, and in doing so they can tie up the property for a long time by filing a lis pendens. So if you expect trouble on a deal make sure to leave enough room in it to be worth the time and trouble  - I've found that if you plan for the worse, everything usually goes perfect, and if you expect everything to go perfect, you get nothing but trouble. ;-)

Sean OToole
0
Avatar

I have a property that I'm interested in that is going up for trustee sale for HOA.  If I win the bid, will I be respondsible for any other loans on the property such as banks, 2nds and taxes?

cjwessel
0
Avatar

I have a property that I'm interested in that is going up for trustee sale for HOA.  If I win the bid, will I be respondsible for any other loans on the property such as banks, 2nds and taxes?

cjwessel
0
Avatar

I have a property that I'm interested in that is going up for trustee sale for HOA.  If I win the bid, will I be respondsible for any other loans on the property such as banks, 2nds and taxes?

cjwessel
0
Avatar

I have a property that I'm interested in that is going up for trustee sale for HOA.  If I win the bid, will I be respondsible for any other loans on the property such as banks, 2nds and taxes?

cjwessel
0
Avatar

I have a property that I'm interested in that is going up for trustee sale for HOA.  If I win the bid, will I be respondsible for any other loans on the property such as banks, 2nds and taxes?

cjwessel