Which Liens Survive Foreclosure? [updated 2024]

When a property is foreclosed, not all liens attached to the property are erased. This blog will focus on the key phrase “which liens survive foreclosure,” providing a comprehensive guide to understanding which liens remain and which are wiped out after a foreclosure sale. By the end of this article, you’ll have a clear understanding of lien priority, the types of liens that may survive, and how these liens affect buyers and homeowners. We’ll also cover frequently asked questions to help you navigate the complex world of real estate liens.

Table of Contents

What Are Liens?

A lien is a legal claim or right against a property that allows the creditor to take possession if the debt isn’t paid. In real estate, liens often arise from unpaid mortgage loans, property taxes, or contractor services. When multiple liens exist, they follow a priority order, which determines their status in the event of a foreclosure. Understanding which liens survive foreclosure is critical for both property owners and potential buyers. Some liens will remain attached to the property, creating financial obligations for the new owner.

Types of Liens and Their Priority

The priority of a lien is important because it determines the order in which debts are paid off in a foreclosure sale. Generally, liens fall into two categories: senior and junior.

Senior Liens: These are liens with the highest priority, such as property tax liens or the first mortgage on the home. They survive foreclosure because they must be paid off first from the sale proceeds.
Junior Liens: These liens include second mortgages, home equity loans, and credit card judgments. If the foreclosure sale doesn’t generate enough money to cover these debts, junior liens are typically wiped out.

Understanding the priority of these liens helps clarify which liens survive foreclosure and remain the responsibility of the new property owner.

Which Liens Survive Foreclosure?

Determining which liens survive foreclosure depends on the type of lien and its priority. Here’s a closer look at specific liens that may remain after a foreclosure sale:

Tax Liens

One of the most common liens that survive foreclosure is a tax lien. Unpaid property taxes create a lien that typically takes precedence over mortgages and other debts. This means that tax liens will often survive foreclosure, and the new owner must settle these taxes.

IRS Liens

If a property owner owes money to the IRS, the government may place a lien on the property. IRS tax liens generally survive foreclosure, although the IRS has a 120-day redemption period to reclaim the property. Buyers need to account for this potential obligation when purchasing a foreclosed home.

Mechanic’s Liens

Contractors or suppliers who have not been paid for work performed on a property can file a mechanic’s lien. These liens can sometimes survive foreclosure, especially if they were filed before the mortgage. If a mechanic’s lien was placed before the foreclosed mortgage, it may still be enforceable after the sale.

Homeowners Association (HOA) Liens

HOA or condominium association liens may also survive foreclosure, depending on state law. In some states, a portion of HOA fees (referred to as “super liens”) takes priority over the first mortgage, making them harder to eliminate in foreclosure.

Child Support Liens

Unpaid child support can result in a lien against the property. In many cases, child support liens survive foreclosure, especially when the state’s laws give priority to these types of liens.

Environmental Liens

Some local governments may place environmental or code enforcement liens on properties for violations. These liens typically survive foreclosure and become the responsibility of the new owner.

The Role of Lien Priority in Foreclosure

Lien priority plays a crucial role in which liens survive foreclosure. When multiple liens exist, senior liens must be satisfied before junior liens receive any payment from a foreclosure sale. Junior liens, such as second mortgages or judgment liens, are often wiped out if the sale proceeds aren’t enough to cover their balances. Conversely, senior liens remain attached to the property, even after the foreclosure.

Implications for Buyers

Understanding which liens survive foreclosure is critical for buyers considering foreclosed properties. If a lien remains after the sale, the new owner becomes responsible for paying it. This can lead to unexpected financial obligations. Potential buyers should perform thorough research and consider consulting a real estate attorney to fully understand the lien situation before purchasing a foreclosed property.

Protecting Your Interests

If you are a homeowner facing foreclosure, it’s important to understand the potential impact on existing liens. Some liens may survive the sale and continue to affect you or the new owner. By consulting with legal professionals, you can better protect your financial interests and make informed decisions about your property.

FAQs

Which of the following liens are not eliminated by a foreclosure sale?
Liens such as IRS tax liens, property tax liens, and mechanic’s liens filed before the sale are not eliminated by foreclosure.

Does a foreclosure wipe out an IRS lien?
No, IRS liens generally survive foreclosure. The IRS retains a right of redemption for up to 120 days after the foreclosure sale.

Does foreclosure wipe out liens in Texas?
In Texas, junior liens are typically wiped out during foreclosure, but senior liens, such as property tax liens, will survive.

Does a foreclosure wipe out all liens in Florida?
No, in Florida, senior liens such as unpaid taxes usually survive foreclosure, while most junior liens are wiped out.

Conclusion

Knowing which liens survive foreclosure is essential for anyone involved in real estate transactions. Senior liens, like tax liens and IRS liens, often remain attached to the property even after a foreclosure sale, while junior liens are more likely to be eliminated. If you are considering purchasing a foreclosed property or facing foreclosure yourself, understanding lien priority and how these liens can affect you is crucial. Consulting with legal professionals can help you navigate the complexities of real estate liens and protect your financial interests.