Transcript:
Hey Everybody, Casey Denman here from Tax Sale Academy.com.
Thanks so much for joining me on today’s video.
Today I want to discuss the topic of liens on tax sale properties. This is often a misunderstood subject when it comes to tax sale investing.
First off, if you’re not familiar with a lien, it’s simply a legal claim by a third party to an asset. This lien is recorded in public records against the property and it impacts your free and clear ownership of the property it’s attached to.
There are a variety of liens. The most common one of course is a mortgage. Beyond that another popular lien would be a mechanic’s lien – in other words if you failed to pay for services rendered, the contractor could place a lien against the property. This happens most commonly in new construction for example.
You also have water and other utility liens, code enforcement liens, IRS liens, HOA liens, and all sort of other fun stuff.
A lien impacts real estate in two primary ways. First, when you attempt to sell your property you won’t be able to sell with a clear title, nor will you be able to get title insurance issued against the property until you pay the lien off and cancel it. This obviously impacts the value of your property substantially, since your buyer not only has to pay to buy the property from you, but they also are required to pay the lien off at some point in the future. Now, you can still sell a property with a lien, but it makes things extremely difficult since there is usually no one who wants to inherit your issues.
Secondly, the lienholder, in many situations has the ability to enforce that lien. In other words, they can foreclose the lien in a court of law and take ownership of your property. Now, there is quite a bit of effort and expense involved with this and but a lien is the start of an owner losing their property.
Alright, so how does this apply to tax sale investing? Why do we even care?
First off what I’m about to say applies to the overwhelming majority of the states. But always check your specific laws to get the details. I’ve said that about 10,000 times throughout my videos – first things first, know your laws.
Alright, have to liens and tax sales.
Well, a tax lien is a priority lien. It takes priority over all other private liens in most cases. So, all of those liens that are privately held liens that we discussed will be removed from the chain of title, provided they were notified properly, during the tax foreclosure. If there was a mortgage, it’s gone. A mechanic’s lien or any other type of lien . . . they’re all gone.
Now, let’s talk about the exception to the rule. We must approach is with common sense. Taxes are important. The government knows this and they’re the ones who wrote the tax foreclosure code. To them, taxes are more important that any secondary private liens. If a bank doesn’t get paid, a bank doesn’t get paid. If the taxes don’t get paid, however, by enough people, then there is serious budget issues which can become a matter of public safety.
So the tax foreclosure code in most states is written to eliminate the private party liens. BUT, they usually see no reason to rob Peter to pay Paul. So with this in mind, most governmental liens will NOT be removed from the property – they’ll stay with the property throughout tax foreclosure. In other words, the county has this tax lien their foreclosing. They also have this lien over here for say, code enforcement issues. The government is NOT going to use their own tax lien process to foreclosure their own code enforcement lien. That just doesn’t make sense does it?
So, when we are researching properties we need to determine if city, county, state or federal liens exist against the property, then we need to determine how much they’re for and if then determine if we should just pay the liens off, buy the property and then negotiate the liens down or just skip the property altogether.
So in short, the tax foreclosure process will remove all private party liens, but MOST governmental liens will still remain. Remember, the government isn’t going to foreclose out their own lien.
That’s it for today guys . . . . this is obviously a big topic and I’ve just touched on it. There are so many different variables that come into play, so I highly suggest you take the time to learn about this topic and learn how your laws apply.
I hope you’ve enjoyed today’s video. If you enjoy our free videos just like this one, you’ll love the academy’s videos which are much more structured, detailed and easier to implement. You can become a member of the academy by going to TaxSaleAcademy.com and clicking on the join button. Again it’s taxsaleacademy.com and click on join.
And if you haven’t yet, you can also pickup you free copy of my book, Tax Sale Playbook, the book itself is FREE, I bought it for you, just cover the nominal shipping cost to get it from my warehouse to your door. And that’s available on the same site at TaxSaleAcademy.com.
I’ll see you guys over on the site. Take care, bye.