Buying a Trustee Sale Property as a Primary Residence

Apr 19th, 2010  
by IrvineRenter  in IHB Property Listing Library

Astute Observations

Astute Observation by what are typical unknown liens?
2010-04-19 01:19 PM

I believe taxes of any type do not get wiped out. what other liens that do not get wiped in a trustee sale? what are typical unknown liens that could possibly be, and can they be recorded after a trustee sale?

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Astute Observation by newbie2008
2010-04-19 02:36 PM

Federal, State, and local governments taxes, Utilities (water, sewer, electricity, gas), M-R and maybe mechanics liens even after the sale. 
Need to check with local lawyers or some good with RE law.

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Astute Observation by BC
2010-04-19 03:39 PM

There are two types of liens that survive the Trustee Sale: those with priority because they were recorded against the property prior to the original recording of the foreclosing lien, and those with “super priory.”  Normally, a first loan will not fund, and it’s accompanying trust deed will not be recorded, until the title company confirms that all existing liens are paid off and removed from the title to the property.  If this was the case, the only liens that survive the Trustee Sale (when it is a first trust deed that is being foreclosed) are liens with super priority. Super priority means that no matter what is recorded against a property (or when), the lien will always have affect and be payable.  Currently, property tax liens are the only liens that have super priority.  At one time, IRS liens for non payment of income taxes had super priority, but this status was eliminated way back in 1963.  Instead, when an IRS lien is present, the IRS has a 120 day “right of redemption”, which means that for 120 days following the Trustee Sale, the IRS can take title to the property by reimbursing the winning bidder with the amount they paid at auction, plus interest.  IRS redemption is fairly rare, and it is not difficult to determine, prior to the sale, whether a property has an IRS lien.

Utilities and state and local taxes do not survive the Trustee Sale.

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Astute Observation by IrvineRenter
2010-04-19 04:02 PM

Thank you for your very clear and accurate response.

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Astute Observation by IrvineRenter
2010-04-19 02:31 PM

Property taxes survive the trustee sale which is why we account for them in the cost of acquisition.

A hidden lien is usually a mechanics lien for some work that was done on the property. There are very specific conditions under which these claims can be made, but since they are unrecorded, there is no way to find them in advance.

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Astute Observation by mark g
2010-04-19 02:47 PM

Is the business model financing the bidder (buyer) if successful or does the buyer need to provide 100% of the cash to participate?

thanks

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Astute Observation by IrvineRenter
2010-04-19 03:28 PM

This particular one is based on a buyer providing 100% cash. I am going to profile the deal for a buyer using financing next week.

The basic difference between the two is what happens to the acquisition discount of 6%-10% under comps. If an owner is their own hard-money lender, which is the case in this deal, then the owner saves this discount. If the the buyer uses a hard-money lender through us, we are giving this return to the lender to compensate them for use of their money.

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Astute Observation by .
2010-04-19 06:04 PM

What is the story with this property?  I went to the open house several weeks ago and the Realtor said the investment group bought it at a foreclosure auction.  She would not reveal the price they paid but she said to not feel sorry for the previous (original) owners because they had extracted a huge amount of money from the property and stopped making payments three years ago.  What kind of Realtor divulges that kind of information to a stranger whether or not it is true?

I did not get the asking price because the house looked pretty much like it would have looked in 1978 minus a ridiculous master bathroom remodel and the hideous view of the Turtle Ridge homes.  If I had been an original owner of this home I would taken the money and run once I saw my hillside view disappear.

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Astute Observation by Chris
2010-04-19 08:29 PM

1. Cash Only
That shouldn’t be too hard.

  2. Limited Selection
The current Redfin selections are probably even worse.

  3. No Inspection
That’s the hard part. Who knows what’s lurking behind the fancy facade?


  4. No Title Insurance
So if title to the property is screwy or if there is any lien issue, we’re f***ed?

  5. No Remorse Period
It’s like marriage grin.......without the annulment.


  6. Unannounced Postponements and Late Cancellations
Another phrase of this is called “extend and pretend”.

  7. High Opening Bids
I heard this before….hopefully your service will prevent buyers from paying too much (will you?).

  8. Competition
The supplies are cheap…whaddya expect?

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Astute Observation by greenpot168
2010-04-20 11:28 AM

I purchased property from 1st bank in trustee sale back in Nov, 2009

I use it as my primary residence.

I paid $473K in auction
The first lien amount is $426K, the 2nd lien is $240K.
12 days later, I recorded trustee deed from 1st bank with Orange County Recorder office.

I guess 2nd bank also receive $47K ($473K-$426K) from trustee sale.

But 2nd bank never send me release of lien.
Do I need to contact 2nd bank to ask them release the junior lien ?

If the 2nd loan refuse to recording “release of lien”,
Would the 2nd lien (junior) stay outstanding?

If I want to sell the house 10 years later, is this outstanding junior lien causing a problem in the future?

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Astute Observation by MWwatcher
2010-04-20 01:23 PM

http://www.redfin.com/search#lat=33.5520669520877&long=-117.6416015625&market=socal&num_baths=2&num_beds=3&region_id=38457&region_type=2&v=5&zoomLevel=12

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