I'm interested in purchasing a foreclosure in NC.
The original owner appears to have been responsible. He purchased the property (in 1993) with a GW Deed. He borrowed $60k to build a house in 1994. This is the lien that resulted in foreclosure (first lien). I checked the deeds before him and they seem to be in order.
The borrower died in May 2005 and left the property to his brother, who died in Sept 2005, leaving the property to his 4 children. This is where it gets complicated. The foreclosing attorney was unable to locate one of the four heirs to notify him of the foreclosure proceedings (attempted via Certified Mail, but undeliverable). I've unearthed criminal records from the heirs with felony convictions for cocaine, assault, possession of stolen property, trespassing, and firearm charges. This type of behavior causes me to worry if they could have serious judgments against them that could encumber the title to the property.
I was under the impression that foreclosure proceedings would remove junior liens against the property (i.e. resulting from judgments against the heirs) - with the only exception being taxes. However, when I was at the courthouse attempting to sort out this mess, a Paralegal (who searches for a major foreclosure law firm) told me that any/all judgments from the past 10 years (20 years for IRS) will remain active against the property and I'll become responsible for them if I purchase it. Someone else told me that by buying at a foreclosure auction, I'm assuming the debtor's position and all of his debts. This doesn't make sense, but then again, I've heard horror stories about people buying properties at auction that have significant debt against them. The foreclosing entity (USDA) even states that the buyer is responsible for any outstanding liens. When I called the local USDA office, the gentleman told me that since the USDA was the first lienholder, the title would be clear (in his opinion...adding that I should seek legal advice).
I feel like there's something I'm missing. Except in the case of a foreclosure by a junior lienholder (which I'd think is rare) or taxes, I don't understand the basis for the warnings and reputation of great risk when buying at foreclosure auctions (other than the fact that you can't really inspect the property).
I called two attornys about doing a title search and neither could do it before Monday's deadline. I know only the basics of searching and if junior liens transfer with the property, I don't trust my own abilities, particularly given the complexity of the situation.
I'm wondering if anyone can offer me insight regarding whether or not foreclosure by a first lienholder erases any/all other liens (except for taxes). If not, do all judgments attach to the property? (There were records of multiple divorces with settlements to x-wives, criminal records/fines, etc.)
I'm also wondering if it could present a problem because one heir did not receive notice of the foreclosure. Anything else I should worried about? Any other input/advice would be most welcome.
Many thanks!
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