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Lien Priority

Liens on the home, (other than property tax or Federal) am I obligated to pay that lien?

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Question: If I buy a home at a foreclosure sale, and later determine there is another lien on the home, (other than property tax or Federal) am I obligated to pay that lien to obtain clear title?

Answer: – Yes, if the lien has seniority, you are responsible as the high bidder to pay off all liens to clear title. That’s why it’s so important to run a title report to make sure there are no liens on the property and to find out how many liens are on the property. I’ve heard of cases where individuals will bid on properties thinking they are a great deal and find out later it was the 2nd mortgage they were bidding on and they have to now payoff the first. Most lose their deposit and it goes back up for auction because they thought the opening bid was for the 1st mortgage. Hope that helps.

What does a lender in first position have to be concerned with regarding 2nd lien holders?

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Question: What does a lender in first position have to be concerned with regarding 2nd lien holders? Why would they not want to negotiate with the Owner until the 2nd lien holder goes away?

 

Answer: 

Nothing… they are in first position.  However, the lender in first position wants to get paid in full.  They don’t like it if they discount the loan and money also gets paid to the 2nd.  They also understand in most cases the 2nd won’t settle for nothing.  So sometimes they will actually tell you what they will allow the 2nd to receive as a payoff if the 1st agrees to accept a discounted price.

I am the third lien holder of a house. The second holder is foreclosing on the house. will I be able to get what is owed me after foreclosure sale?

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Question: I am the third lien holder of a house. The second holder is foreclosing on the house. will I be able to get what is owed me after foreclosure sale?

Answer: -Based on Lien Priority those senior to you always get paid first. So in order for you to get paid, the bid amount must be enough to pay off any senior lien holders. Once they are paid off, you will be next in line to get paid. So it really depends on the bid amount whether you’ll get paid or not.

If I hold the first and the second is forclosing

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Question: If I hold the first and the second is foreclosing
what can I do to ensure that I will still be paid?

Answer: -Lien holders get paid based upon lien priority and there are a few “rules”. Lien priority is based upon when things are recorded. So if you are in 1st position, you will get paid before someone in 2nd, 3rd, etc. So if they 2nd forecloses and no one bids, they have to pay off all senior lien holders. Property taxes are the only exception, they always get seniority over everything no matter when they are recorded.