If tax sale parcel is in bank foreclosure...

Can't seem to find this thru search. In researching tax liens for upcoming tax sales - what happens if the property is in a bank foreclosure process that has already begun? property tax liens take precedence over all liens (federal after 120 day redemption) but if a bank foreclosure process has already begun is this a bigger pain than profit ?? How exactly does this work in this scenario. Should we ALWAYS keep clear of purchasing liens in this case? OR is this a great opportunity since other investors may automatically skip them without doing their homework?

Also, in researching parcel in recorder of deeds, see foreclosure trustee assigned, but then the parcel never deeds to the bank, does this mean that they side-stepped and resolved their foreclosure?

All comments and opinions are welcome!!

Edited: 06/26/2010 at 11:54AM

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

4,267 posts
14 awards
91 influence

Mar 04 '10, 04:32 AM

The bank will have to take care of those unpaid taxes, otherwise their REO will be offered to the tax sale / deed / lien buyers. If bought by somebody other than the bank, the new owner would have the same issue.

For part 2 of your post:
Well, there is either some kind of sale, or there isn't. If it sold somehow (auction, or pre-foreclosure, or REO), then there would have to be a new deed recorded that shows the sale. Until the new deed is found, the old owner is still on title.

Edited: 06/26/2010 at 11:54AM

K Confid

9 posts
1 award
50 influence

Mar 04 '10, 08:41 PM

Thanks for responding Steve. Ok, so I assume I should not pass up these properties just because it looks like they might be in a foreclosure process, necessarily. If they are, and we get to the sale and the bank/mortgage company is not there to bid (obviously not paying the taxes beforehand) and if I acquire the tax certificate, and IF they do not redeem within the allowed time frame, I can still foreclose as usual.

But as an investor, should we assume that to some degree, the bank/mortgage co may not have their act together and may show up and contest at a later date when/ and IF the investor should try to quiet the title?

By the way, with the advent of the new and improved titling processes, is quieting the title still necessary? After the tax lien is foreclosed?

I have several of these issues that came up at the last sale and I was surprised that NO banks were in attendance at our sale, and so the properties I "did not pursue" were not bid upon. I'm thinking I may want to change my strategy this year and put them on my bidding list.

Thoughts from all lien investors on this topic? Steve?

Thanks all. K

Edited: 06/26/2010 at 11:55AM

K Confid

9 posts
1 award
50 influence

Mar 14 '10, 09:43 AM

Any new feedback on these questions??

Edited: 06/26/2010 at 12:03PM

Don Konipol

Note Investor · Tempe, Arizona

Pro Basic

1,068 posts
17 awards
87 influence

Mar 15 '10, 12:35 PM

the reason the banks did not show up for the foreclsosure sale was that the banks all passed on foreclosing that month. Most federal lending institutions have just ended a agreed upon moratorium on foreclosing owner occupied properties. Tax sale liens are a tricky area that requires investor sophistication. While a tax lein will wipeout most other liens, there are various requirements for notification of current lien holders. the taxing authorities are selling with no guarantees. If the existing lien holders were not properly informed of the foreclosure they may still have a valid lien secured by the auctioned property. the main problem with the "forced" sales is that title insurance is not available at the time of purchase. Hence it is quite easy for an investor to miss a superior lien in a title search and have a very unpleasant suprise after purchasing the property.

Edited: 06/26/2010 at 12:04PM

Jim Wineinger

Real Estate Investor · ten mile, Tennessee

1,501 posts
16 awards
56 influence

Mar 15 '10, 01:26 PM

Usually the reason banks do not show up at these sales is that they have an opportunity at any time to pay those taxes as an "interested party". They do not wish to pay out any more money than necessary (which depletes their reserves) if they do not have to. By waiting until the lien is sold and they get the notice of such, they are hoping that things (economy) is going to get better and they will be in a better position with their reserves and or their other loans will cover the amount necessary.

If the investor bids an amount that covers all taxes and penalties and there is an excess amount that is acceptable to the bank, they may choose to allow the lien to go all the way to purchase and then they will claim that excess monies from the county. This not only saves them foreclosure costs but also gives them the redemption period to get their books in better order. It is a calculated risk on their part. The creditors that lost money and the homeowners are only ones who can claim that excess money.

But in any situation, if they do not pay those taxes they will lose the house that they did not want to begin with!!!!! The banks will not usually bid for their own houses since they are about to own them (the lower the bid the better for thier redeeming them) unless the bid gets high enough that the excess amount is an acceptable amount to them, then they may bid (not wanting to take the bid) just to get it even higher and more acceptable to them.

Edited: 06/26/2010 at 12:04PM