Tax delinquent property

8 Replies

I guess the easy answer is that it depends...... as you state....most of the time people seem to escrow taxes and insurance, so it is tough to get behind on taxes.  The lender will pay them.  In some cases  if the taxes are not escrowed, the lender will pay them at some point if there are lawsuits or tax liens.   You may want to find an Ohio expert to discuss how tax liens/deeds work in your state.   I think there is a person named the tax lien lady that works your state or lives there.

There may be a rare circumstance that a tax lien/deed auction could wipe out the mortgage,but I would think that is rare.  If it does happen, then you want to check on redemption rights.   Here in Texas the owner or lienholder might have a couple years to buy it back or challenge the sale.   So even if you thought you won, they come back and pay you back and get the house back.   This all is a very simplified answer, but might give you the basics.

I would think you would want to market to lien free homes or homes with liens small enough compared to the market value.   So that you could by the home, pay off the taxes and the mortgage and still have room to make a profit.

@Devonte Perdue   If you want to work a deal with the owner, the mortgage still needs to be paid. If the property goes to tax foreclosure then the mortgage is usually wiped out. But the mortgage holder gets notified and they will usually pay the taxes to protect their position. 

Now as Bruce said normally the mortgage company collects money for taxes with the mortgage payment. So you might ask "why are the taxes due if there is a mortgage?"  Well it is foolish but sometimes mortgage companies do not collect for the taxes. What is more common is the property owner stops paying the mortgage.  Then the mortgage company stops paying the taxes.

Originally posted by @Devonte Perdue :

Hello, I'm a beginner investor in ohio. 

Question: when marketing to a person that has a property that is behind on taxes, what happens to the mortgage loan on that property?

 All the liens & encumbrances need to get paid at settlement. Taxes, mortgages, commissions, title fees etc....

In most states, if the tax lien is paid prior to the redemption date, you as the buyer will pay the taxes, penalties and often interest back to the individual who purchased the tax certificate, or the county if no one purchased the tax certificate. You can contact the County Auditor for the payoff amount according to your closing date.

Speaking for Indiana... If the redemption period is past be more cautious. Be certain you are not just purchasing the tax deed. You would want the court to have processed quiet title or a title company to offer a tax certification which is them insuring the title.

I have seen too many local banks offer refi loans which does not escrow taxes and insurance. If the property is worth the money, the bank will come up with the cash. Otherwise, they will lose the note... However! the bank can pursue the previous owner (not the new owner with the tax deed) of the note for a deficiency! 

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