If a property goes into default and foreclosure with an unfinished house on it, what is the status of any liens?
Joe H
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You'll need to ask your lawyer as to how liens are affected by such a default. I suspect you'll be SOL.
Property tax liens hold.
I think that other tax liens are wiped out.
But I assume that you are talking about labor and material liens used for construction.
If the lien has not been perfected it might be possible for it to be pefected after the foreclousre, but I doubt that it allowed.
A true foreclousre (vs a dead in leu of) wipes out all junior liens. Don't think that it wipes out senior liens.
But the mortgage* would not have been issued if their where any senior liens unless it was a 2nd mortgage or similar.
And in case like that sinior lien holder would end up foreclosing themselfs for buying it at foreclousre to protect their intersts. But it is possible that it was missed.
* AFAIK, In most states, out side of a mortgage or property tax liens, a lien can't force the sale of the property (ie, foreclosure), but in a few they can.
And there two basic types of property loan liens. One is mortgages, the other is trust deads also the commonly used term is "mortgage" and the state laws handle them differently.
And labor/material liens also vary by state.
So this information is worth about 10 times what you pay for it.
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Bill, I'm holding the first. A recorded note. No second I am aware of. State of Utah.
Construction and materials liens are what I'm wondering about.
Do I owe for the builders debts? And again, I don't know that there are any.
Hypothetical at the moment, Cover My #### kinda question at this time.
Joe H
Hypothetically, if no liens are recorded, there aren't any. Hypothetically, someone might be filling in the paperwork right now to file one. Hypothetically, it might be valid and it might not. Each state has their own rules regarding the proper filing of liens. You need to check your state laws and see what kind of timeframes the vendors, subcontractors and mechanics have than wait it out if you want to be sure. Bob's next test date: 12/10/07
i think that liens are not wiped out by a foreclosure, but would get in line depending on date of filing.
it may even be that the first is subject to the date order, i'm not sure/don't know, would reccomend looking it up.
you may "owe for builders debts" related to this project if there is any profit, i think it works like this, if you foreclose and get a property worth $150,000 and you have invested $100,000 you are responsible for $50,000. if you have $200,000 invested no one can come after you.
again, i post this as a question, this is how i thought it worked, would appreciate being corrected.
The reason they call it a "first" is because it is chronologically the first lien recorded. A first lien of $100 would be paid off before a 2nd lien of $200,000! If someone foreclosed a 1st lien of $100, all the liens behind it would be wiped clean....even that $200k note!!!! IRS liens and tax liens have special powers and can survive a foreclosure on other liens. Your examples don't make any sense according to what I know about liens. Bob's next test date: 12/10/07
ok thanks.
Haven't had to do it this downturn but filed liens in both 1981 and 1990 and foreclosure status didn't effect my lein or eventually getting paid. I guess it's under the legal theory that since the lein holder has improved the property, it makes it more valuable to the bank and they can eventually sell it for more then if there were no improvements.
Runnerguy
If liens were wiped clean from foreclosure you'd see alot of people borrowing from themselves and never paying.
That would be fraud..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
it would be fraud if you planned it, if it was an unintended mistake in business just another reason to file bankruptcy.
it wouldn't be fraud if you borrow to expand your business and it went under, of course you would probably have to go ahead and lose the money, removing the motive for trying it in the first place, but you might be able to do it if you wanted to.
all those pesky rules and regulations to stay on top of when you are running the numbers.
I don't think it would be fraud...it just wouldn't work and it wouldn't accomplish anything. If a second position lien holder forecloses, the first lien stays in place. The only liens wiped out are junior liens. Bob's next test date: 12/10/07
All junior liens are wiped clean in a foreclosure action. Your idea would work except you're forgetting that the banks won't make a loan and take the second position. They are smarter than that. They insist on all liens being paid off and they take the first position.....always. When a 2nd loan is made, it is made with a higher interest payment because of the greater risk.When a foreclosure action is started on a first position lien, the second position lien holder has to be the one standing on the steps of the courthouse and win the bid to protect their second position lien. Bob's next test date: 12/10/07
the second position lien holder has to be the one standing on the steps of the courthouse and win the bid to protect their second position lien.
Or ensure that the successful bid is high enough to satisfy the second. No need to win.
The most interesting auction I've seen was a guy who bought his own delinquent note from a commercial lender. Foreclosed on himself.
The point was to beat the second. The holder of the second I knew, attended the auction just to see how much he was going to lose, had no intention of bidding. Total loss. The only other bidder, my friend, hadn't been able to raise enough cash.PAHS works. Bury it.
Interesting story. I hadn't thought about that possibility.
Bob's next test date: 12/10/07
Intrigued me too. The mysteries of mortgages...
I'm holding a couple of mortgages, both in arrears. The 12% guy decided not to make any more payments a few months ago, had paid all he thought he should. No reason to pay late fees, right? Lots of equity, I'm in no hurry.
The other, I allowed a 12 month payment vacation as part of a complicated deal that awarded me a $150k parcel for $33k purchase price. Anyhow, he called at the end of the 12 months and asked if I wanted payments. 8%, I didn't need the cash, said no hurry. That was 5 yrs ago. Again, small LTV- at the time.
He's paying me (not commission) to represent him in the sale. Got a nibble yesterday, no advertising. I'll be able to explore financing, if needed.PAHS works. Bury it.