Tuesday, May 15, 2007

query: state inheritance lien divest through foreclosure pennsylvania

Well, let your underwriter be your guide, but if I were the title agent I'd consider it divested if the PA Department of Revenue was given notice of the foreclosure. I would be looking for the PA Department of Revenue on the 3129 Affidavit.

If the foreclosing attorney overlooked the potential inheritance tax, they can still go to the Department and seek a release for the real property.


Confused in Pa said...

We have purchased (put 10% down on) a
property at a PA Sheriff sale. It was a Tax Foreclosure. In our title search, there was an open 15 year home equity loan that was unsatisfied. It was taken out 10 days prior to the senior mortgage being satisfied. So we assumed the
homeowner used the equity loan to pay off the senior mortgage. We also assumed
that this would be considered a first mortgage. I spoke with the attorney representing the township(with the tax lien) prior to the sale, and he assured
me that the unsatisfied mortgage would be divested because they were served with a 3129. Since the sale on Monday, I've spoke with 3 other attorneys, and I'm
getting conflicting answers. Two attorneys are telling me that it is definitely
divested. But the other is saying it isn't. Needless to say, we are a little
nervous about paying the balance on the property (which is due Friday) We appreciate any help you could give us.. Thank you!

Diane Cipa, The Closing Specialists® said...

Hi, confused. I'm confused, too.

Go back to your attorney and ask to see the Affidavit Pursuant to 3129. This affidavit discloses who was given good notice in a foreclosure action. I have only seen this affidavit used in a mortgage foreclosure. That doesn't mean that it isn't being used in a tax foreclosure, however, I have never seen one included in my search or mentioned by an underwriting attorney as we have considered tax sale transactions. Your attorney should be able to clear that confusion and explain how the 3129 is related to your concern.

If I am understanding this scenario, the tax sale is a "judicial" sale? Ask your attorney if this is the case.

A judicial sale has an underlying court order which will divest liens included in the quiet title action. So if you are purchasing out of a judicial sale, your attorney should be able to look at the quiet title action and see if this unsatisfied mortgage was included.

If the sale is not a "judicial" tax sale, the mortgage can still be divested in a plain vanila tax sale but there are extra steps that must be taken and it's possible that the 3129 is the notice trail that serves that purpose.

Also, ask your attorney about any redemption periods and how they impact your transaction.

All that said, I would hope that you are purchasing an owner title insurance policy through one of the attorneys just in case they are wrong.

You don't want to gamble on a two out of three chance of being right.

Trust me, the title insurer won't want to take any chances and they will have sufficient information in hand from the courthouse to know what they are talking about OR at least you'll be insured if everybody screwed up.

Good luck!