Re: CA forclosures - Posted by Ronald * Starr
Posted by Ronald * Starr on August 03, 2001 at 17:08:13:
You are giving a short, sweet answer to Rob.
I think, though, in the interest of accuracy, I should mention a couple of exceptions to what you said.
One: IRS liens. True, a junior IRS lien will probably be wiped off the property. But this is so only if: The IRS was notified of the sale, probably by the trustees sale company. Then, after the sale, the IRS has 60 days to redeem the property from the party that bought it at the trustees sale auction. The successful bidder gets back what s/he paid plus the princely sum of 6% per annum from the IRS. I had a property redeemed once. Met the IRS worker at Denny’s Diner and got my check and, if I recall correctly, signed some papers.
Also, IRS liens take their priority from the date on which they arise, not upon the date they are recorded in a county recorders office. So, even if the lien is filed after the date of recordation of the deed of trust, there is the possibility that the IRS lien will be senior to the deed of trust and thus not wiped off by the sale.
Also, in CA, there is the possibility of mechanics lien resulting in a judgement which might be senior to the foreclosing deed of trust and thus not wiped off the property. If the work was started before the deed of trust was recorded or the materials (I believe) were delivered to the property before the deed of trust was recorded, then a judgment resulting from the foreclosure of the mechanics lien would result in the judgement being senior to the foreclosing deed of trust. Thus, it would not be wiped out by the foreclosure on the deed of trust. When buying foreclosures in CA, always do a title search and look for the mechanics lien. Rarely will there be a problem with this, since the lenders do not like to have it happen. But, what if the lender is an unsophisticated private party?
Now, mechanics liens expire if there is no court case filed to foreclose on them. I believe the time is 60 days after being recorded, but it could be something different, such as 45 days or 90 days. If there is no court case filed, the foreclosure investor should be ok. However, there may be some difficulty with the title companies getting good title on a resale of the property.
So, you can see that there are some risks to investing in foreclosure sales that few people know about. I do not recommend that beginners start with foreclosures. Yes, there can be very good money with foreclosures, but you could lose much or all of your investment on some deal. Wait a few years until you are more grounded in real estate investing and then, if you want to try forelosures, study up on them intensively.
Good Investing and Good PostingRon Starr