When buying Foreclosures and Auction property, do you need to clear all liens on the property?

One question posed by many clients when purchasing foreclosure property at auctions is what liens require satisfying prior to closing. Do all liens on auction property need to be paid and cleared before closing on foreclosure and auction properties?

A summarized answer is: whether outstanding liens and encumbrances, i.e., mortgages, homeowners association assessments, delinquent taxes, or other liens must be paid before a clear title can be transferred typically.  Depending on whether it is a short-sale, foreclosure/trustee sale, bank-owned or conventional transaction.

In some cases, short sales and foreclosures/trustee sales may require that the liens are paid before a clear title is transferred. How they are paid is usually negotiated by the buyer, seller, or a combination of parties. Please contact the seller or its agent to inquire about any liens on a given property in which you are interested. Ask how the property will be deeded or transferred to the buyer.

For example, will the buyer receive a warranty deed guaranteeing clear title to the property? Or will the title be transferred with the liens, making the buyer responsible for the existing liens? You would also need to double-check for any addendums by the bank or documents supplied by the auction company regarding details of anything that would need to be paid by the buyer at closing. Not typical, but on occasion, this can be the case.

The majority of our clients purchasing a property including foreclosures and auction property use the Property Lien Report, or Full Property/Owner Lien Report located on the property records page of the site for due diligence for liens on auction property.

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