Selling Notes/Tax Man

[James Gravitt]

If I've turned over a note to a note buyer, who is responsible for the taxes? What if I had the note for 3 months, then the note buyer bought the last 21 months? How does this work?

[Bill Gulley]

Hi, if taxes are not due yet, there is not an issue as the note holder does not pay the taxes, the borrower does.

If the note is in default and someone is buying a non-performing note, simply disclose that taxes are due, again, as a note holder you are not liable for the taxes.

Now, when and if you foreclose or take a deed in lieu of foreclosure, you'll inherit the tax bill when you take title. If the property is sold at a sale, the new buyer in a foreclosure will pick up the tab. If you sell it as the old note holder and new owner, you'll need to pay the tax liability at closing on a pro-rated basis, your buyer will be responsible for taxes from the closing date on.

Guess you're talking about real estate taxes.....good luck, Bill