Lien Seniority References?
Can anyone recommend or supply a good resource for the determining the priority of liens specific to Colorado?
For example the order of priority/position of: local property tax, HOA, mechanics, mortgages, federal taxes, code enforcement, municipal and child support liens, or any other liens I have left out.
Ask a real estate attorney, they are supposed to be up-to-date on the current tax laws. They usually prepare the documents for placing a lein on a property, so they should know what the order is.
Tanya
Hmmm, am I asking this question the wrong way?
How are you all doing short sales, pre-foreclosure and foreclosure deals without knowing about liens?
Maybe the Colorado part is throwing you off? How about just specific to where you are?
Nothing unique about CO lien law in this regard, as CO law is derived mostly from English Common Law and Spanish Law, as is true of other states in the southwest.
And the priority of all liens (with exception of tax liens, keep reading) is as per date first recorded.
RE property tax liens, are just laid on when overdue, more or less automatically.
These always have to be dealt with when conveying any "fee" (title) interest in the RE. They might be years old, but NEVER expire, and no county recorder or title co. is going to let you record any conveyance, nor would a title co. let seller pass any title without their being paid..
But a deed NOT recorded, could pass the title, subject to those past due taxes.
IRS liens are a little different, in that they are really against the person and ANY RE he/she might own in the county where the lien is recorded/
If the person's 1st or 2d D/T is foreclosed, that IRS lien might be eliminated as against that property only, not against any other assets of debtor.
But IRS has a specific legal period, folloiwing the auction, to redeem the property itself, and pay off the other mtg lien holders, or waive their right.
Usually they waive, but if the first were only a few thousand bucks and the IRS saw a clear opportunity, they'd surely redeem, pay off the 1st, and take the RE themselves, in satisfaction of their tax lien.
If IRS isn't paid on or before the foreclosure action, that lien will just stay of record in that County & will attach to any OTHER RE that person might own.
A J lien is just added to the other non-tax liens, and its priority is as of recording/abstacting date....so it would be eliminated (against that RE only) if a prior mtg lien is being foreclosed.
FYI, it is the practice of most careful D/T foreclosure co.s and lawyers to notify ALL lienholders of scheduled foreclosure action, after first obtaining current title opinion from title co. so they know of all existent liens. And all lienholders thus know of oncoming foreclosure action.
Most Js are never collected, but if J holder were to know about foreclosure action, he'd have the right to bid to protect his interest.
I'd guess that of all J liens abstracted against RE, the plaintiff's lawyer is going to make every effort to enforce & collect his lien soon after final J is obtained, so HE can get paid...and it's going to be rare that any good J lien is wiped out by some other lien holder's foreclosure.
Finally, remember that just because a lien is eliminated, that does NOT mean the debt is likewise eliminated...not so, and the creditor might still collect against other property.
I'd guess there have been some shocked and surprised debtors who think the debt is gone just because the lien was not enforced against a particular RE property....but the creditor just lies low and makes a later attack on another property of the elusive debtor.
You said that the priority of leans in based on the date that they are recorded.
I think you are saying liens have priority by chronological order.
That's confusing to me because I thought some leans don't act this way such as a HOA lean or a Property tax lean can supercede a 1st Mortgage or a 2nd Mortgage.
Also I thought a 2nd can take over 1st position if there is an agreement between the lenders?
Say a homeowner buys a house in 1990 and takes out his mortgage. That would mean the mortgage is in 1st position.
Then in 2000 he takes out a HELOC, that would go in 2nd position.
Then in 2002 he takes out another small home equity loan. that would go in third.
So you have
1st position - original mortgage
2nd position - HELOC
3rd posiition - home equity loan.
Then say he doesn't pay his HOA fees for 5 years they put a lien on his house.
Then say he doesn't pay his property taxes, they put a lein on his house.
Then say he doesn't pay his fed taxes, the IRS puts a lien on his house.
Then say he doesn't pay the contract after he fixes his driveway and he puts a mechanics lien on the house.
Where do they go in position?
1st position - original mortgage
2nd position - HELOC
3rd posiition - home equity loan.
4th position - HOA lien
5th position - Property Tax lien
6th position - IRS lien
7th position - Mechanics lien
or
1st position - Property tax lien
2nd position - HOA lien
3rd posiition - original mortgage
4th position - HELOC
5th position - home equity loan.
6th position - IRS lien
7th position - Mechanics lien
Isn't this integral information and necessary understanding to doing pre-foreclosures, short sales and the like?
Don't you have to know all this in order to figure out where all the money is and how to go about your offer?
No, it's not necessary for you to be a lawyer to work this out.
Just order a title opinion on the prop and the title co. will, as part of its opinion, give you a list of those liens they will require to be paid at any closing of any conveyance...and without which they will NOT pass new title to you. Or cooperate with any conveyance.
And FYI, HOA dues are going to be paid by any lender who's foreclosing. I've yet to see a HOA go to war to collect on the HOA dues, as they know they'll be gettin paid.
Since they're univerally recorded by the HOA, and the lender was on notice, the HOA lien would be superior to the bank's loan, but again, it'd be so small it'd be no real factor.
Further, just understand, that short of a foreclosure sale of the RE, you, as short sale buyer, will have to satisfy ALL the liens you name...or buy that prop. subject to those liens.
And the only ones you will NOT be able to negotiate, in the least, are the RE taxes...everybody else, including IRS, IS willing to deal and negotiate...IRS is NOT a pushover, and they'll do their own appraisal & analysis, and might not come down much, but they do recognize value of PV paid in hand, vs. FV not collected, maybe collectible sometime down the road.
okay, a "title opinion" how much does that cost you?
Is that the same as a Current Owner and Encumbrance report (O&E)? or something different.
My realtor buddy told me that he can get free O&E reports faxed to him all day long if I want them.
Is this the same thing?
---- If the lender is going to be paying for the HOA lien, does that mean that you will just see a higher pay off the mortgage+HOA fee, or do you see this separate or what?
For you second post - AHHHH! the fog is clearing a bit! SO if you are going to short sale the property you will be contacting all the liens and negotiating reductions with them.
I think I am confusing myself because I am considering this from a foreclosure sale, bidding on it at the auction. Wouldn't you have to know each and every lien and the amounts and such so you don't get bit after you win it at the auciton?[ Edited by The-Rehabinator on Date 12/04/2003 ]
AAARGH
Don't know why I'm coming back again, but your questions are intelligent, even if my responses aren't
First, on any foreclosure notice you'll see, they'll insert therein the debt that has to be paid prior to the auction for the FC to go away...so you can see what early settlement of their past due debt will get you....and that might be a cheap alternative to a title op. to a realtor.
But a local title co. wouldn't charge a great fee for producing you a title op.
The last FC I did to take back a prop. my lawyer ordered his own title op so he'd KNOW what other liens were, whether any had higher priority, etc.
On the second issue, short sale purchases, the buyer is trying to head-off any FC without it ever happening, and to do do, he must deal with ALL creditors/lienholders amicably, so it never goes to auction...of course, the only one that has to be paid or settled with NOW is the foreclosing bank, and the others might give you some time.
If you're really seriously interested in any pre FC RE, I'd sure recommend your getting a title op, so you'll know what you'd be getting if it did go to FC, and who has to be paid off by foreclosing bank, and what you'd be getting if it did not...and what debts you'd still have to face with the other creditors.
I'm just doing this myself right now on a pre FC prop, and it's very interesting, (clinically, since I'm not the poor debtor ), to see the reactions and responses of the various creditors.
Some won't negotiate at all, and some are easy and some are hard bargainers...like I say, interesting.
Oftentimes, the little 2d, carryback note that's being carried by the seller himself, CAN be "shorted" because the poor seller is totally ignorant of the process, and he/she is so afraid of getting nothing that he/she IS willing to take less right now to get something out of his note.
And if the RE has really been trashed by the delinquent buyer who's being foreclosed upon, the bank that's got the 1st might be equally happy to settle for consid. less than full amount due them.
LIkewise IRS might see the handwriting and take a lot less in order to get something this side of FC, where they'd probably get wiped out.
I think it goes like this.
First : property tax and other county and city assesments.
Then liens based on date recorded with 2 small provisos described later.
IRS and state taxes get in line based on date recorded also.
Mechanics liens are based on when the work started.
A lien may agree to drop its position on the list (subordinate).
Minor provisos - if an obligation records late and in the interim another has recorded, then if the holder of the 2nd knows of the first, the first is ahead in line even though it recorded later.
Finally - there is a little complication if there is a construction loan being funded in increments and a lien files between payments. In that case it depends on the wording of the note.