Hey all wanted to run something buy you guys. I have a client I am working with who owes like a $1700 on a tax lien. He also owes about 45K on his mortgage. The property is scheduled to go to sheriffs sale in December. Do you think the bank will pay his tax payment so they wont lose the balance on the note? After they do that will they be more willing to negotitate a short sale payoff. His interest rate is about to go up 13%. Thanks for your opinions!
The bank probably will not consider a short sale unless you can prove that the home owner is having severe financial hardship. The other option is to have him start missing payments.
These days we have been able to get the banks to consider short sales before the home owner is an arrears if we are able to show he can no longer make the payments.
He is already 60 days behind as of November 1st. I have a bunch of medical bills to help prove the financial hardship.
I would say it is highly likely that the bank would pay of the tax lien.
How much is the house worth? Let’s say the house is worth $50K, if the house were sold via tax foreclosure, the bank would lose $50K.
If the bank pays the taxes, they would usually work out some type of escrow shortage spread, where the taxes would be paid off over a period of time as an addition to the mortgage payment.
Sounds like it’s in the best interest of the bank to pay the tax lien, then negotiate a short sale.
If he’s behind on his mortgage, negotiate a short sale and add in the tax lien to your purchase cost. It’s possible you could get the tax lien discounted, too. You’ll have to ask if this is customary in your area.
You said the mortgage balance is $45,000, and the tax lien is $1700.(in real life, the tax lien could be $1700 but the back taxes not paid could be considerably more than that.) But let’s take the simple example $45k and $1.7k. The bank has to offer $46,700 because any more than that, and they will have to give the excess to the owner. Any less than that will be a loss on the mortgage. Remember, they hold the $45k mortgage. One second after the foreclosure auction starts, they will bid $46,700. They will want to go through the foreclosure process to make sure that all junior liens are wiped out.
Now after foreclosure, you could ask for a short sale. The bank could be getting presure from the bank examiners to clear their books.
The bank is not going to pay the back taxes then let the house go via a short sale. There is no benefit to them in this. They will either foreclose then take care of the back taxes to have a clear title for themselves or they will accept a short sale and you will be left to deal with the back taxes and any other liens.
it could go either way. They could pay the taxes or they could not. Ask the person at the bank who is handling the case. If it is not in default yet, then you will probably end up speaking to someone in their legal department. As long as you have a letter of authorization to discuss the account you should be able to find out what their plans are.
Then again, they could be stubborn and refuse to tell you what they intend to do, in which case you may want to ask what their options are then take an educated guess as to what you think they will most likely do.
I have done 2 SS this past month that I included on the HUD1 delinquent taxes AND utilities and the bank paid all of them off without even asking a quesiton besides who the checks go to. We just over estimated what the actual payoffs were for the delinquent bills. Why not try to do this for the homeowner that you are helping, they will love you for this.
JD
The bank will pay the taxes or lose their 1st lien position. They could wait for the tax auction and pay the taxes from their bid, or do a short sale and pay the taxes from the proceeds of the short sale… but one way or another, they will pay the taxes if the owner does not.
Tax liens are usually recorded on a property shortly after they are delinquent but (depending on your state) rarely enforced through foreclosure unless it’s been an issue for years. Some states will file a lien within a few months but give you plenty of time to catch up. You really need to check the laws in your state, find out if is it a state or federal lien, why is the lien on this property, etc…ask these questions (which no one yet in this forum has addressed). Is it going to sale for the tax lien or a mortgage default? Do you truly have a bargain? Ask yourself why the lender isn’t paying the back taxes? Do they even know there is a tax lien? Is this an IRS lien? If so you have much more work to do. Also, most lenders will require you to keep property taxes current or they can foreclose even if you’re current on the mortgage. I have seen this on every mortgage note I’ve ever reviewed in California. It seems to me there isn’t enough information about this scenario to make an educated decision, yet options are being handed out here.
I’m continually amazed at the bad advice given on this site.
:rolleyes
I have had experience where the bank paid the taxes so that they would not lose the house. Usually, the taxing authority notifies all the lien holders when the file a lawsuit to foreclose. That cues the bank that there is a tax issue.
I am going through a short sale negotiation right now where there are tax liens on the property. Right now, the lender wants to foreclose. If they do, then they will have to pay the taxes before they can sell the property as an REO.
Whether or not the bank is more open to a short sale is really based on the net they want to receive. The $1,700 can be shown on either the buyer’s side or the Seller’s side of the HUD-1. If it’s on the Seller’s side, then the bank is paying for it & it reduces their net.