Step 3 – Lien Search
You must be careful before you execute a foreclosure to determine what other liens are in place…
As soon as possible upon the initiation of the foreclosure process, a title search of the property should be obtained. There are two main reasons for this. First, it will ascertain that the mortgagee’s lien established by its deed of trust has the priority claimed by the mortgagee, or that there are liens filed of record that are senior in priority to the mortgagee’s lien. If there are liens senior to the mortgagee’ lien, any purchaser at the foreclosure sale would take the property subject to such liens which could affect the decision to even foreclose at all.
Second and more importantly, such a search will reveal the existence of any IRS liens that affect the property. If any IRS liens have been filed, notice of the foreclosure sale must be given to the IRS at least 25 days prior to the foreclosure sale date. Upon receipt of the notice, the IRS will have 120 days from the foreclosure sale date to redeem the subject property from the purchaser at the foreclosure sale for the price paid by such purchaser. Failure to give such notice will result in the property purchased at the foreclosure sale remaining subject to such IRS lien. However, the IRS rarely exercises the right of redemption as there would have to be a great deal of equity over and above the redemption price to make such a redemption economically feasible. Also, due to lag times in the reporting of courthouse document filings, it may be necessary to postpone the foreclosure sale to the following month in order to give proper timely notice to the IRS.
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