What Liens Survive Foreclosure?

When you acquire a property through a foreclosure auction, it can be a promising investment opportunity. However, it’s crucial to be aware of any outstanding liens that might persist even after the foreclosure sale. Understanding these liens and their implications is essential to avoid unexpected financial burdens. In this article, we will explore what liens survive foreclosure and provide valuable insights for investors.

The Impact of Liens After a Foreclosure Auction

Once you’ve successfully purchased a property at a foreclosure auction, the responsibility for any existing liens falls squarely on your shoulders. These liens can include government liens and other obligations that persist despite the foreclosure sale. It’s crucial to note that when the foreclosure deed is recorded and lien holders are notified, you become liable for addressing these liens. Failing to do so can have serious consequences, potentially affecting your ability to sell your personal home or even leading to the foreclosure of other properties you own, although this is a rare occurrence.

Government-Issued Liens Superior to Foreclosure

Certain government-issued liens take precedence even in the event of a foreclosure. These include:

IRS Liens: In specific circumstances, the IRS may maintain its claim on the property. However, if the IRS does not exercise its redemption right within 120 days of deed recording, the lien will automatically expire.
Department of Treasury Liens: These can persist, except in cases where USC exceptions apply.
State Tax Liens: Liens related to state taxes can continue to exist.
Liens from Federal Agencies: Various federal entities, including the USA or the Department of Justice, can retain their claims on the property.
US Department of State Liens: These liens are also subject to surviving the foreclosure.

Common Liens Superior to Foreclosure

In addition to government liens, several common liens can endure the foreclosure process. These include:

Code Enforcement Liens and Orders: These may arise for reasons such as debris removal, weed control, or property maintenance.
Demolition or Environmental Liens: Liens related to demolishing structures or addressing environmental concerns may persist.
State Child Support Liens: Outstanding child support payments can result in liens on the property.
Board of County Commissioners for Special Assessments: Liens related to special assessments imposed by the county can endure.
Utility Liens: Unpaid utility bills can lead to liens on the property.
Water/Sewer Delinquencies: In select states or counties, delinquencies related to water and sewer services can result in liens.
Unpaid Real Estate Taxes/Liens: Liens for unpaid property taxes can continue to affect the property.
City Liens: These may arise for road improvements or maintenance carried out by the city.
HOA or COA Liens: If the property is located in one of the 22 Superior Lien States, Homeowners Association (HOA) or Condominium Owners Association (COA) liens can take precedence.

Judgments and Liens That Can Be Removed

There are certain judgments and liens that may be wiped off from the property, provided that the lien holders were properly notified and had the right to bid on the property at the auction. These include:

2nd and Junior Mortgages: Liens such as home equity loans that are subordinate to the foreclosing mortgage.
Credit Card Judgments: Judgments recorded after the foreclosing mortgage.
Personal Judgments: These can be removed if they were recorded after the foreclosing mortgage.
Mechanic’s Liens: Liens from contractors and mechanics, recorded after the foreclosing mortgage.
Other Judgments: Any additional judgments recorded after the foreclosing mortgage.

Conclusion

Understanding which liens survive foreclosure is vital for anyone considering investing in a property through a foreclosure auction. To protect your interests and navigate this complex landscape, it is advisable to seek professional assistance. Whether you’re a seasoned investor or a new entrant in the real estate market, being aware of the potential liens and their implications can help you make informed decisions and ensure a successful investment venture.