Results 1 to 14 of 14

Thread: Tax liens on foreclosed property - how are they resolved?

  1. #1
    Join Date
    Sep 2006
    Location
    Las Cruces, NM
    Posts
    2,037

    Tax liens on foreclosed property - how are they resolved?

    I'm curious how tax liens on a property are resolved if the property is foreclosed. People who dare to buy property at foreclosure auctions are warned to to find out about liens on the property. But what happens if a mortage company company wins the auction? Would the state or federal government seize the property from the mortgage company to get back taxes? Or do state and federal agencies wait until the mortgage company sells the property to some hapless private citizen and then seize the property from him?

  2. #2
    Join Date
    Mar 2015
    Location
    Virginia
    Posts
    1,209
    It really depends on too many things for there to be a hard and fast rule. You should always check for liens, or have a professional title search done if you do not know how to check yourself.

  3. #3
    Join Date
    Feb 2003
    Location
    McKean, PA
    Posts
    15,595
    Blog Entries
    1
    You as the buyer become responsible once you sign for the property. It is best to get a lawyer involved up front so the liens can be identified and a settlement established before you take ownership.

  4. #4
    Join Date
    Apr 2013
    Location
    Kansas City
    Posts
    2,652
    Thats what title insurance is for, isn't it? We had a city fine for tall grass on our property which was foreclosed when we bought it. We had to pay, but were reimbursed by the title company. They're supposed to research for liens. At least thats the way it works around here.

  5. #5
    Join Date
    Feb 2003
    Location
    McKean, PA
    Posts
    15,595
    Blog Entries
    1
    Quote Originally Posted by Stan Calow View Post
    Thats what title insurance is for, isn't it? We had a city fine for tall grass on our property which was foreclosed when we bought it. We had to pay, but were reimbursed by the title company. They're supposed to research for liens. At least thats the way it works around here.

    That only works if you pay for a title search and they fail to find the lien. If they find it and report it you still have to either get the original owner to resolve it or you pay for it.
    Last edited by Lee Schierer; 11-22-2018 at 9:26 AM.

  6. #6
    Join Date
    Sep 2006
    Location
    Las Cruces, NM
    Posts
    2,037
    I'm aware that a private citizen who bids on property at a foreclosure auction should first have a title search done and should buy title insurance. However, my question is: What happens to a mortgage company that wins an auction where there are liens on the property? Does a mortgage company get some sort of legal exemption from liens on the property? Or must it settle the liens?

    The specific example that made me curious is a house on Topley Av in Las Cruces NM. You can find this property on Zillow and other real estate sites, but a real estate agent said the property is "inactive", i.e. not yet for sale. By registering for a free online account on the county clerk's website, one can discover that a mortgage company won the property at a foreclosure auction. It got the deed in March 2018. The private citizen who was foreclosed has state and federal tax liens against him that go back to 2015. There are also warrants of "Levy & Lien" against him that go back that far. These direct the Sheriff to seize and sell the citizen's "real and personal property".

    The Sheriff never got around to seizing and selling the Topley Av house. Why that didn't happen is an interesting question.

  7. #7
    Join Date
    Sep 2016
    Location
    Modesto, CA, USA
    Posts
    9,885
    In my county which is just south mortage meltdown central the lien holders just waited for the economy to recover. This included the county for unpaid taxes. The interest clock continues to run so they are not really out any money. i think the county should have sold the propeties for back taxes but they do not did not do that here with all the people walking away from their houses.
    I think it takes 3-5 years for the county to foreclose on a property and sell it for back taxes so it is cheaper for the county just to wait out a depression and not pay legal fees. Also selling those properties that cheap would lower appraisals and thus reduce property taxes even more.
    My brother bought a foreclosed property in Oregon and sidestepped all those questions. The old lady needed long term medical care beyond what social security would pay. The state paid for the medical care then foreclosed on the house after she died to collect what they had paid. The kids could have bought it for the medical costs but they did not care about her or the house.
    So my brother bought it through a regular real estate agent. He knew the state had either paid or invalidated any claims on the property. If anyone tried to go after my brother for claims he would just have referred them to the state. He felt it was a very safe way to buy property. You know the laws are written to protect government from such claims.
    Bill D.

  8. #8
    Join Date
    Sep 2007
    Location
    Longview WA
    Posts
    27,347
    Blog Entries
    1
    This is one of those things that is probably somewhat different in different states.

    It would be best to work with a local real estate lawyer who knows what the law is in your area.

    In some cases the liens may be settled by the state at sale during escrow.

    jtk
    "A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
    - Sir Winston Churchill (1874-1965)

  9. #9
    Join Date
    Feb 2003
    Location
    Griswold Connecticut
    Posts
    6,927
    Stephen

    There will be lawyers involved.
    Title searches, liens, home inspections, etc, are checked regardless of the status of the current mortgage. The lawyer whom you contract with will research all of this for you and let you know your responsibilities and legal obligations. If it's just taxes, that's easy. Sometimes though, the homes are trashed and will need to be reinspected to regain the certificate of occupancy, and in this case the mortgage company, state, local, will have a time table.
    As far as the mortgage company buying the property back with liens, that's for the lawyers also.
    It's actually not in any institution's best interest to seize the property from a hapless individual. The money needs to "move".
    Last edited by Mike Cutler; 11-22-2018 at 5:03 PM.
    "The first thing you need to know, will likely be the last thing you learn." (Unknown)

  10. #10
    Quote Originally Posted by Stan Calow View Post
    Thats what title insurance is for, isn't it? We had a city fine for tall grass on our property which was foreclosed when we bought it. We had to pay, but were reimbursed by the title company. They're supposed to research for liens. At least thats the way it works around here.
    We had the same thing, but the property wasn't foreclosed. It was the job of the bank to pay the fine since they were the ones that incurred it for failing to keep up the property. They didn't do so until the money had been released by the mortgage company, then they ran down and took care of it so the final sale could take place.

  11. #11
    Whether the tax lien has priority over other liens depends on state law. While most states are about the same, a few are vastly different. Here in PA a tax sale one time of the year is subject to mortgages and other liens. If it doesn't sell, there is another sale six months later, and mortgages and other liens are generally invalidated at the 2nd property tax sale.

  12. #12
    Join Date
    Mar 2015
    Location
    Virginia
    Posts
    1,209
    Quote Originally Posted by Stephen Tashiro View Post
    The Sheriff never got around to seizing and selling the Topley Av house. Why that didn't happen is an interesting question.
    It is complicated. Liens always have a priority. The highest priority lien gets paid in full before the next tier gets anything. There are a number of things that factor in to figuring out priority, but usually it is first come first served, meaning the first lien recorded has the highest priority, the second lien recorded is next in line and so on. Property tax liens often take first priority regardless of when they are recorded. That is why if you have a mortgage the bank usually requires the taxes to be paid into an escrow account, and they pay them directly. State and federal income tax liens as far as I know (I am not an expert) cannot “cut in line” like local property taxes often do.

    Seizing and selling a property is expensive, so there has to be equity in the home over and above any property tax lien or outstanding mortgage to make it worth going through the process. If the mortgage company “won” at auction, they almost certainly did not get the full amount of their own mortgage back, so it does not surprise me that the sheriff did not seize it, even if there were other outstanding liens. Those other liens probably had a lower priority than the mortgage, and nobody with any sense would go through the process of having the property seized and sold without good reason to think there will be money left over after the higher priority liens are retired.

    As to whether there are any liens that survive to the point that a new owner could be responsible for them, you really need to have somebody verify that for you. As was mentioned above, title insurance will guarantee the property is free of liens, or you should talk to a local lawyer.

  13. #13
    Join Date
    Feb 2003
    Location
    Lafayette, IN
    Posts
    4,563
    I think it's important to note that there are two ways property is taken from an individual. One is that the mortgage holder will sue the individual for nonpayment, and if no settlement is reached (usually only made by bringing the mortgage current), the courts will award the property to the mortgage holder. The second usually happens when there is no mortgage (mortgage holders tend to pay the property taxes from an escrow account, as noted in previous posts), and the property owner neglects to pay property taxes. After some predetermined length of delinquency, the sheriff can seize the property and auction it. If there is a lender involved, they will usually bid on the property since a tax lien is typically far smaller than an outstanding mortgage. Then they resell it for what they can get to minimize their losses. At least that's what I've seen locally.
    Jason

    "Don't get stuck on stupid." --Lt. Gen. Russel Honore


  14. #14
    Join Date
    Sep 2016
    Location
    Modesto, CA, USA
    Posts
    9,885
    In my county several real estate folks where scamming the sheriffs auctions. One of them would bid on one property another on a different property etc. Then they would get together and bid against each other for the properties and sell them around the group for higher more realistic prices. Thus shorting the county and the federally chartered bands and loan agencies out of millions. The FBI investigated and federal time is being served by them all.
    In my county the loan holder does not have to provide cash for a bid on their ,own loan property a check will do. All others have to pay the bid, in physical cash, actual dollar bills, not a check.
    Bil lD.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •