What Gets Wiped.
What Follows the Property.

The baseline rule

A foreclosure wipes junior liens and leaves senior liens intact. Priority is almost always determined by recording date — first in time, first in right — with statutory exceptions for certain government liens and construction-related claims.

When the first mortgage is foreclosed, everything recorded after it (second mortgages, HELOCs, judgment liens, mechanics liens recorded later, most HOA dues) is wiped by the sale. Everything recorded before it (earlier mortgages, pre-existing easements, covenants, property tax liens) is not. That’s the baseline. The complications are the exceptions.

Property tax liens

Property taxes are the oldest and hardest-to-avoid lien on any real estate. In every state, unpaid property taxes survive a mortgage foreclosure sale. The winning bidder takes the property subject to any outstanding tax bill.

Practically, tax arrears are usually paid off from the sale proceeds by the clerk or trustee before surplus calculations, but not always — if the sale price is at or below the foreclosing debt, the taxes may simply ride with the property to the new owner. Bid math should always include a pull of the current tax balance and any pending special assessments.

IRS federal tax liens

Federal tax liens are a special category. Under 26 U.S.C. § 7425, a federal tax lien is only discharged by a non-judicial foreclosure sale if the IRS received written notice of the sale at least 25 days in advance. Even with proper notice, the IRS retains a 120-day right of redemption after the sale — during which the government can pay the winning bidder the purchase price plus interest and reclaim the property.

In judicial foreclosures, the United States is typically named as a party and the IRS lien is extinguished by the judgment — but the 120-day federal redemption right still attaches.

For investors, an IRS lien on title means: (a) confirm the plaintiff’s attorney properly noticed the IRS, (b) expect a 120-day overhang on any resale or refinance, and (c) price the risk that the IRS might actually redeem. In practice, the IRS redeems less than 5% of the time — but the threat keeps most title companies from insuring the property until the 120 days expire.

HOA and condo association liens

HOA liens are where state law splits sharply. Most states follow the basic priority rule — if the HOA lien was recorded after the first mortgage, it’s junior and gets wiped by the mortgage foreclosure. But 21 states and DC have adopted some version of the Uniform Common Interest Ownership Act (UCIOA) “super-priority” rule: a portion of unpaid HOA assessments — typically 6 to 9 months of regular dues — takes priority over the first mortgage.

Super-priority states include: Alabama, Colorado, Connecticut, Delaware, District of Columbia, Florida (limited), Hawaii, Illinois (limited), Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Washington, and West Virginia.

Nevada is the state where this matters most historically. Before a 2015 clarification, a Nevada HOA foreclosure on the super-priority portion could wipe out a first mortgage entirely — investors bought homes at HOA auctions for a few thousand dollars and kept them free of the underlying mortgage. The Nevada Supreme Court confirmed this in SFR Investments v. U.S. Bank (2014). Subsequent legislation tightened notice requirements, and lenders now aggressively protect themselves by tendering the super-priority amount — but the priority structure itself is unchanged.

For investors: in super-priority states, the HOA portion survives a first-mortgage foreclosure. The new owner inherits that slice unless the foreclosing lender paid it off. Check the HOA estoppel letter. Regular post-sale HOA dues accrue immediately.

Municipal liens

Water, sewer, stormwater, trash, and other utility service arrears are handled differently in different states:

• Florida, Ohio, Pennsylvania — municipal utility liens enjoy statutory priority equivalent to a tax lien and survive foreclosure.
• Maryland, New Jersey — unpaid water and sewer bills attach to the property and survive a private foreclosure.
• California, Texas — utility arrears are typically treated as consumer debt owed by the prior occupant, not a lien against the property.

The safe assumption on any new acquisition is a walk-through call to the water, sewer, and stormwater departments to pull current balances before closing.

Code enforcement liens

Municipal code violations — overgrown lots, derelict structures, unpermitted work, unsafe building citations — typically become property liens once recorded. These frequently survive foreclosure, because the underlying citation runs with the land and the lien itself sits in a senior priority position in most states.

Florida is the most aggressive jurisdiction for this — daily fines of $250–$500 can accumulate for months or years, compounding into five- and six-figure liens that survive the mortgage foreclosure. Miami-Dade, Broward, and Palm Beach counties routinely surface code liens exceeding the property value.

Code liens are one of the most commonly missed due diligence items at auction. A search of the code enforcement database (separate from the county records) is non-negotiable on any property with a vacancy or visible disrepair signal.

Mechanics and construction liens

Mechanics liens are filed by contractors, subcontractors, suppliers, or laborers who performed work on the property and weren’t paid. Priority usually dates back to the commencement of work, not the recording date — which means a mechanics lien recorded after the first mortgage can still claim priority if the work began earlier.

This matters on any property with recent construction or renovation activity. Investors bidding on a half-finished flip, an addition under construction, or a property with recent permits should expect mechanics lien exposure and price accordingly.

Mechanics liens have short enforcement windows — typically 60 to 180 days from filing — and are often allowed to expire if the owner never responds. But an active, timely-foreclosed mechanics lien can survive a mortgage foreclosure when work began before the mortgage was recorded.

Easements, covenants, and restrictions

These run with the land and survive every foreclosure, tax sale, and transfer. A recorded easement for utilities, access, or drainage stays. Deed restrictions stay. Subdivision covenants stay. HOA governing documents stay. These aren’t liens in the money sense — they’re encumbrances on use — but they affect value and should be reviewed at bid time.

Environmental liens and exposure

Environmental liabilities — CERCLA cleanup costs, state Superfund analogs, underground storage tank contamination — attach to the land and transfer with ownership regardless of foreclosure. A new owner who takes title to a contaminated property can face cleanup liability even without knowing about the contamination, unless they qualify for the “innocent landowner” or “bona fide prospective purchaser” defenses under CERCLA § 107(r).

For foreclosure investors, environmental exposure is concentrated in: former gas stations, dry cleaners, industrial sites, auto body shops, and any property with a known underground storage tank. Environmental diligence — Phase I assessment — is cheap relative to the liability exposure on commercial or mixed-use acquisitions.

Tax sale rules are different

Everything above assumes a mortgage foreclosure. Tax deeds operate on a different theory — a tax sale is a sovereign sale that generally wipes more junior interests than a mortgage foreclosure does, including junior mortgages. But tax deeds have their own survivability quirks (IRS still gets 120 days, code liens often still survive, title insurance is hard to obtain). See the tax deed reference for the full picture.

A disciplined pre-bid lien check

For any serious bid, a competent investor pulls:

• Full chain of title from the county recorder’s office
• Current property tax balance including any special assessments
• Active code enforcement cases and any recorded code liens
• Water, sewer, stormwater, and municipal utility balances
• HOA estoppel letter showing assessments due
• Federal tax lien search (IRS)
• Judgment and UCC lien searches under the owner’s name
• Mechanics lien search (recorded and notice-of-commencement filings)
• Environmental screen for any commercial or questionable residential use

This is the checklist that separates auction winners from auction losers.