DEAR BENNY: My husband and I are looking to purchase some homes for investment that are being foreclosed. Because many of these loans are the first deed of trust that are defaulted and the legal notice mentions nothing of second or third deeds of trust, if purchased at auction, who is responsible for additional liens taken out by the owner? –Lindsay

DEAR LINDSAY: While state laws may differ, in general, when the holder of the first deed of trust (the mortgage document) forecloses, it eliminates all subordinate liens. Before you consider buying at a foreclosure sale, you must obtain a complete title report, which would indicate what liens and clouds are on the land records. Some tax liens may have a super priority, and must be paid off at closing (escrow). You should also make sure that you have inspected the house — inside and out– although many homeowners who are facing foreclosure are reluctant to open their house to strangers. Too many of my clients have been burned when they bought property at a foreclosure sale. There is a lot of homework you have to do in advance of the sale, and I recommend that you get a tax professional and a lawyer to assist you along the way.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.

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Filed under: Foreclosure, Legal Advice in Common Scenarios, Mortgage, Selling