Transcript:
Hey there, it’s Casey Denman from TaxSaleAcademy.com and welcome to our weekly question segment. This week’s question comes to us from Mario.
His question:
Say I buy a property at a tax sale, what happens to the mortgage or lien? I’ve seen that is goes away but that sounds too good to be true.
Great question – before we answer if I do want to remind you viewers that you can get a free copy of The Tax Sale Playbook shipped to you if you cover the nominal shipping cost by going to TaxSaleacademy.com.
Alright Mario, so it all depends on state law but in just about every state any private party mortgage or lien would be extinguished through the tax foreclosure as long as they were provided the proper notice according to the state statute.
Now, a few details about this:
It is not too good to be true. The folks in the government write the laws and they do so in a manner that protects the government. The real estate taxes are the most important thing to insure that the local governments operate as needed, you know by providing law enforcement, fire protection, roads, bridges, schools that kind of things – these taxes have priority over other liens for that reason.
Now, during the tax foreclosure process there are certain notices that must be sent out to owners or any lien holders. These notices will allow the owners or lienholders to pay off the taxes due, which would cancel the sale and would help them to secure their interest or lien position in the property. If they don’t want to lose their interest in the property, they pay the taxes. If they don’t pay the taxes, then they lose their position. It’s as simple as that.
Now, the exception are any governmental liens. So city or county water liens, nuisance liens for thing like trash, weed violations or that kind of stuff. Any governmental liens would be the responsibility of the investor after purchase. The government isn’t going to simply cancel one of their liens so another county department like the tax collector can benefit. That doesn’t make much sense.
Another exception are IRS liens, in wich case the IRS can come in refund you and then take the property if they so choose, which is rare.
So, in short, private party liens will be extinguished through the tax foreclosure process in most cases.
Hopefully this answered your question Lindsey. If you have a followup question or anyone else watching has a question feel free to leave it down below under this video or any of our videos here on youtube.
And as always, check out TaxSaleAcademy.com to grab a copy of your free book or if you’d like to take advantage of the most detailed and step by step training we offer thorugh The Tax Sale academy. See ya next time!