Won It at a Virginia Trustee Sale, and the First Mortgage Is Still on the House

What the Sale Clears and Where the Money Goes

The trustee (the person running the sale) sells under the power written into the deed of trust. The sale cuts off the foreclosing deed of trust and every lien (a creditor's claim on property) recorded or docketed after it. Those junior creditors are paid, if at all, from the sale money, in order, and nothing more.

Virginia law fixes the order the trustee pays out the proceeds (§ 55.1-324), and the deed of trust cannot change it:

1. The expenses of the sale and the trustee's commission.
2. Taxes, levies and assessments that outrank the deed of trust, including the current year's share to the sale date.
3. The foreclosed debt, then any liens of record junior to it, in order of priority.
4. Whatever is left goes to the former owner.

A senior lien (one recorded earlier) is not on that list because it is not paid from the sale. It stays on the house. The Supreme Court of Virginia confirmed it in 2019 (Futuri Real Estate v. Atlantic Trustee Services), when the buyer at a second-lien sale asked the court to declare the first lien wiped out and lost.

How to Read the Notice of Sale

The notice names the deed of trust being foreclosed by date and by the deed book and page or instrument number where it was recorded. Pull that instrument from the clerk's office, along with the recorded appointment of substitute trustee (the trustee the lender appointed). Everything recorded before the foreclosing deed of trust is a candidate to survive the sale.

The statutory form says only "Terms: Cash." Every other term in a published notice is the trustee's own, and the wording changes from firm to firm. One 2026 Hanover County notice put it this way:

"The property and the improvements thereon will be sold as is, without representations or warranties of any kind. The sale is subject to all other liens, encumbrances, conditions, easements and restrictions, if any, superior to the aforesaid deed of trust and lawfully affecting the property. Trustee shall have no duty to obtain possession for purchaser. All risks of casualty pass to successful bidder at conclusion of bidding."

A 2026 Henrico County notice from a different firm:

"Sale is subject to all prior liens, easements, restrictions, covenants, and conditions, if any, of record, or other matters which would be disclosed by an accurate survey or inspection of the premises."

Some notices say only "Additional terms to be announced at sale," so arrive early enough to hear the terms read.

The notice will not warn you about senior liens either. Virginia's notice statute (§ 55.1-321) requires mailed notice to the owner, junior deed-of-trust holders of record and associations that filed a lien, not to judgment creditors, the IRS or the locality. A notice defect does not void the sale, and the buyer has no duty to check. The title search is yours to run.

The 2024 Rule: 90 Days to Pay Off the Senior Loan

Since July 1, 2024, every purchaser at a Virginia foreclosure sale has to certify that it will pay off any priority security instrument, meaning a senior loan on the house, no later than 90 days after the trustee's deed is recorded (§ 55.1-321(A2)). The statute says "any purchaser at a foreclosure sale," not only buyers at second-lien sales.

The former owner gets a remedy to match. If the owner keeps paying that senior loan after the sale date, the owner can petition the circuit court to recover those payments from you, plus attorney fees and costs.

The statute does not say how trustees collect the certification or what happens if the 90 days run out. Ask the trustee before the sale.

Get the senior lender's payoff figure before sale day. Your real price is your bid plus that payoff plus the carry until you pay it.

What Rides Through the Sale

Real estate taxes. Real estate taxes are a lien ahead of every other lien until they are actually paid (§ 58.1-3340), penalties and interest included. The trustee pays them from the sale money ahead of the lender, but if the money runs out, the lien stays on the house and you pay it. If the locality already has a tax-sale suit on file, pay the taxes and get into the case: a completed tax sale wipes out the deed of trust and bars anyone who did not file a claim.

Water, sewer, demolition and nuisance liens. Delinquent water and sewer charges become a lien "ranking on a parity with liens for unpaid taxes" in localities that adopt the ordinance (§ 15.2-2119), once entered in the circuit court clerk's records. A locality's cost to tear down, secure or repair a dangerous building, nuisance abatement charges (the locality's cleanup costs) and criminal-blight costs rank the same way (§§ 15.2-906, 15.2-907). Ranking with taxes, they outrank the deed of trust and survive the sale. Trustees commonly adjust only real estate taxes, so check the treasurer and the clerk yourself.

Judgments docketed before the deed of trust. A money judgment becomes a lien on the debtor's real estate when it is docketed (entered in the judgment docket) in the clerk's office where the land sits (§ 8.01-458). Docketed before the deed of trust was recorded, it is senior and survives. Docketed after, it is junior and cut off. Judgment creditors get no notice of the sale, so priority turns on the docketing date alone; have the title agent confirm an old judgment has not expired.

Mechanic's liens on new construction. A mechanic's lien (a contractor's claim for work) for repairs or renovation is junior to any deed of trust recorded before the work started, so it is cut off. On new construction, the deed of trust is preferred only to the extent of the land's value, and the mechanic's lien comes ahead of it as to the building (§ 43-21). A mechanic's lien must be filed within 90 days and sued on within six months or it dies. Any half-built or newly built house needs a title agent's read.

IRS liens. Federal tax liens follow a federal rule (26 U.S.C. § 7425). If a notice of federal tax lien was filed more than 30 days before the sale and the trustee did not mail the IRS written notice at least 25 days ahead, the sale is made "subject to and without disturbing" the lien: you own a house with a live IRS lien and no clock running. If the trustee did give notice, the lien is cut off, but the United States can redeem (buy the house back) for 120 days from the date of sale, at what you paid plus 6 percent interest per year plus your net expenses on the property. Rehab is not named in the statute, so do not count on getting rehab money back. Ask the trustee whether IRS notice went out, and when.

Federal liens that are not tax liens. An SBA or USDA loan, a HUD partial-claim second mortgage (a second lien to HUD) behind an FHA loan, or a federal judgment plays by a different rule (28 U.S.C. § 2410). A Virginia trustee's sale does not touch them at all. Only a judicial sale (a sale ordered by court) that names the United States can, and even then the United States has one year to redeem. The FHA partial claim is the common trap. Any federal lien in the chain gets a title agent's read before you bid.

The former owner. Virginia gives the borrower no right to buy the house back after a trustee's sale; the IRS window above is the main exception. Possession is a separate question, covered in our article on an occupied house after a trustee sale.

HOA and Condo Assessments

Virginia gives association liens no "super-priority" slice ahead of a prior first deed of trust. Priority turns on dates.

A property owners' association lien, once perfected (filed in the clerk's office) by a memorandum of lien, yields to real estate taxes, to liens recorded before the declaration (the association's founding document), and to any mortgage or deed of trust recorded before the lien was perfected (§ 55.1-1833). A lien perfected after the deed of trust was recorded is junior and cut off at the sale. One perfected before it, which is rare, survives.

Condos carry one difference (§ 55.1-1966): the deed-of-trust carve-out covers only a first deed of trust recorded before perfection that secures an institutional lender (a bank or similar lender). A perfected condo lien can outrank a second deed of trust, so a buyer at a second-lien condo sale can inherit it. Whether a private lender's first deed of trust counts as institutional is a question for a title agent.

Assessments (the association's dues) from sale day forward are yours. Both statutes count a purchaser at a foreclosure sale as the owner, whether or not the deed is recorded. A junior association lien is cut off, but get the association's payoff letter anyway and ask a title agent whether it can bill you for anything that accrued before the sale.

Taxes and Fees When You Record the Trustee's Deed

Budget three taxes at recording, before clerk's fees and deed preparation (several notices say the trustee's attorney prepares the deed at the high bidder's expense).

1. State recordation tax (the tax on recording deeds): 25 cents per $100 of the price or the assessed value, whichever is greater (§ 58.1-801). If your bid is below the assessment, confirm the tax base with the clerk; the statute and the foreclosure regulation's example read differently.
2. Local recordation tax: up to one-third of the state tax (§ 58.1-814), about 8.3 cents per $100.
3. Grantor's tax: $1 per $1,000 on the accepted bid plus any costs you pay, less any senior lien that survives the sale (§ 58.1-802). By statute it falls on the grantor (the seller on the deed), but the law lets the parties shift it to the grantee (the buyer), and Virginia trustees' terms routinely do, in words like "including the grantors tax."

On a $200,000 bid at or above the assessment, with no surviving senior lien, that is $500 in state tax, about $167 in local tax and $200 in grantor's tax: about $867, excluding clerk's fees and deed preparation. Regional add-ons apply only in Northern Virginia ($0.10 per $100) and Hampton Roads ($0.06 per $100).

The Owner's Title Policy Is the Real Protection

The trustee conveys only what the deed of trust gave the trustee. The trustee's deed carries no general warranty (a promise of good title), and the Hanover notice quoted above says so: "as is, without representations or warranties of any kind." A notice defect does not void the sale, but an advertising defect can, and a former owner can put the trustee's deed in doubt in limited circumstances (Parrish v. Fannie Mae, 2016).

An owner's title policy (insurance on your ownership) stands behind you if the foreclosure itself was defective, and you can get one after a Virginia trustee's sale. Expect exceptions: the IRS 120-day window until it runs, any subordinate federal non-tax lien, unrecorded and survey matters, and any senior lien. The title agent will want the foreclosure file, from the notice and the advertisement through the trustee's deed.

Bankruptcy and Reinstatement Can Void the Sale

A bankruptcy petition filed before the sale stops it automatically. The filing itself is the stay (a freeze on collection); no court order is needed (11 U.S.C. § 362). Trustee terms make every sale "subject to post-sale confirmation that the borrower did not file for protection under the U.S. Bankruptcy Code prior to the sale," and cover a servicer (the company collecting payments) audit showing the borrower reinstated (caught up the missed payments) or paid off the loan before the sale. If either turns up, in the words of one 2026 notice, "the sale shall be null and void, and the Purchaser's sole remedy ... shall be the return of the Purchaser's deposit without interest."

Your winning bid is not final until the trustee clears both, so do not spend a dollar on the house before settlement. Sales also get postponed and cancelled before the auction starts; our article on foreclosure auctions that never happen walks through the reasons.

Before You Bid

1. Pull the foreclosing deed of trust. Pull it and the appointment of substitute trustee, then read everything recorded ahead of it.
2. On a second deed of trust, get the senior payoff. Add it to your bid and plan to pay it within 90 days of recording the deed.
3. Check the treasurer and the clerk. Taxes, water and sewer, demolition or nuisance charges and any tax-sale suit; judgments docketed before the deed of trust and mechanic's liens.
4. Look for federal liens. An IRS lien and its filing date, an SBA, USDA or HUD lien, a federal judgment. Ask the trustee whether IRS notice went out, and get a title agent's read.
5. Call the association. Get the payoff letter, compare the lien date with the deed of trust, and budget the dues from sale day.
6. Budget the recording taxes and the deposit. About $867 on a $200,000 bid, plus clerk's fees and deed preparation; a 10 percent deposit in certified funds; settlement in 14 or 15 days.
7. Line up the title agent before sale day. Ask whether they will insure and what they will except, and order the owner's policy at settlement.
8. Do not spend on the house before settlement. Bankruptcy or reinstatement voids the sale and returns only your deposit.
9. Check upcoming sales and the auction basics. Our free auction tracker lists upcoming Virginia trustee sales, and How to Buy at a Virginia Trustee Auction covers the sale itself, from the deposit to settlement.

The liens that survive a trustee's sale belong in your numbers before you bid, next to the rehab and the carry. Harvey Capital Funding lends to Virginia investors on purchases and renovations. To talk through a deal, call us at 804-208-0465 or use Discuss My Deal.

This article is general information, not legal advice. Talk to a Virginia attorney and a title agent before you bid.