SeattleMargo.com

"The property was foreclosed, so all of those other liens are wiped out. You don't need title insurance."

I hear this all the time. And it is wrong. While it is true that most liens are wiped out by a trustee's sale; a number of liens may survive. If we assume that the trustee did their job properly and gave notice to all junior lien holders that were entitled to notice under statute then most liens and junior deeds of trust are eliminated. Any party that is entitled to notice of the pending trustee's sale that didn't receive that notice is not eliminated - in other words: you can't wipe out someone's secured interest in the property without telling them what you are doing.

Additionally, there are a small number of liens that survive the trustee's sale, even if they are subordinate to the deed of trust that is foreclosed. – Read More

Any Fixture Filing recorded under the uniform commercial code act continues to be secured against the personal property that was affixed to the real property and remains in a first lien position thereon. In other words - if the foreclosed party bought windows or a gas furnace (the most common items) and used a UCC-2 fixture filing to secure that debt against the real property, the lender still has a 1st lien on the windows or furnace that are attached to or installed in the house, even though the deed of trust was foreclosed.

Regular dues payable to a condominium association. Condominium Association dues are protected as a 'super-lien' under the condominium statute. Although any recorded lien for unpaid assessments may no longer be exercised against the unit because that document was voided by the recording of the trustee's deed - the condominium association is allowed to demand payment for six months of regular monthly assessments for the 6 month period immediately preceding the trustee's sale.

Liens against the property filed by a municipality or a water or sewer provider that is franchised by the local municipality to provide those serviced to the property. Water & Sewer Liens, Garbage Liens if garbage service is provided by the city, and other liens in favor of the local municipality are typically protected under statute and cannot be wiped out by a trustee's deed.

Taxes & assessments that are owed to the government. It's the government - they want their money. Just plan on paying it, along with any arrearages.

Mechanic's and Materialmen’s Liens. If a contractor or someone supplying materials for the improvement of the property is claiming either that the materials were delivered, or that they started work on the property before the deed of trust that was foreclosed was recorded, they can claim priority over that deed of trust even though their lien was recorded afterward.

Judgments and liens in favor of the United States of America, including the Internal Revenue Service. Although these judgments & liens don't survive foreclosure - the United States retains a right to redeem the property to satisfy the debt that is owned unto them. The rights of the IRS are fairly short lived, extending only 120 day - but rights of redemption in favor of other government entities extend as must as a year.


In summation - although a property has been through a foreclosure and a trustee's deed has been recorded doesn't mean all the liens are wiped out and it is always good to get title insurance.

Linda Knight - Chicago Title