Tax deeds are titles to properties. When a real-estate owner fails to pay property taxes, a municipality takes possession of a property and any existing mortgage or debt on the property doesn’t have to get paid off. Is this true, that once you have purchased an existing deed and the original owner did not claim the deed during the redemption period (any existing mortgage or debt on the property doesn’t have to get paid off)
My understanding that once a homeowner gets behind on their property taxes it goes to a tax lien sale. Not sure how far they have to get behind. If you buy this lien you pay the amount of back taxes they owe. In Indiana if they redeem (or pay) their taxes in the first 6 months you gain a 10% return on your money, if they redeem within 6-12 months you gain a 15% return, and if they don’t redeem within 12 months, you get the property. The existing mortgage still needs to be paid, but will be the responsibility of the delinquent homeowner and is now between them and the mortgage holder, not you.
Most municipalities auction the tax deeds or tax certificates. In my locality you bid not on price but on yield meaning the bidding starts at say a 15% yield as described above. The winning bidder is the person willing to accept the lowest yield. Competition at these events drives down the yield on the investment.
What happens if the home owner does not make the mortgage payments and house goes into foreclosure?
In Texas, a home with a mortgage almost never gets to a tax deed sale. The bank will pay the taxes and foreclose on the home before losing a home for taxes (which will be much lower than the outstanding mortgage in most cases.)
The tax deed supersedes all other liens and deeds. Once you purchase a tax deed, the property is yours, free and clear, with the exception of redemption by the original owner.
It varies from state to state, so I suggest going to the county or state (office, website) to get the specific information for your state.
I have purchased one property (land) via Tax Deed in Texas. I have been to several auctions.
bdub is correct - property taxes liens are “super-liens” - superior to all others including mortgages/deeds of trust.
It is superior, but what happen when 1st forecloses? now it is bank owned, and the original owner no longer have an asset. Does the bank have to pay you at that point? I assume thats what bdub is saying
in fla if you buy home at a tax deed auction sale you get a tax deed from the county free of any other liens!
you own it!!
Basically, the bank forecloses and brings taxes current. Otherwise, tax authorities can take the house for a small amount, but I’ve seen the properties get bid up by new investors anyway, at least in Travis county since real estate is hot here.
Some owners have been doing short sales to avoid the foreclosure. In that case, taxes will be paid at closing.
Be very careful purchasing tax sale properties. Most major title insurance companies will not insure tax title properties. Some will, with a lot of hoops to jump thru. (First American Title has an affliate that will “clear” the title and give you a certificate, and then they will insure it. Others will make you file a quiet title suit and, of course, get a judgment quieting title)
Just do your due dilligence before forking out cash for a great “deal”. Sometimes, they just aren’t worth the hassle. Also, your exit strategy is very important here. If you are buying and holding, to rent, it is not as big of a deal than if you are trying to flip or rehab and sell.
Steve
What happens if the property is getting said for prop. texs but the IRS has a lien on it.