In PA, mortgagees (lenders/banks) can also redeem tax delinquent properties with same redemption period as the owner. My question is, why arent they always redeeming delinquent properties (assuming most houses do have a mortgage on it) by paying a bit of tax on it? It seems like a great deal for banks just pay a few thousands in owed taxes and get a house!
So, how does any house make it to auctions, or am I not getting something right?
@Jennifer T. If the bank “redeems” the tax lien. The property owner still owns the property. most mortgage documents would say that the property owner needs to reimburse the bank for the taxes the bank paid.
Now, why doesn’t the bank pay the taxes so it does not go into tax sale? Normally they do. That is why banks escrow tax and insurance payments.
However if an owner is in default on their loan, the bank hasn’t been collecting tax payments. Also some banks don’t escrow money for taxes and insurance. Why they don’t I don’t know.
Also if the is no loan on the property the there is no lender to come in and save the property.
There can be many reasons a lender doesn’t step in. Sometimes they are just asleep at the wheel.
Not sure how your state works, but in mine, it is rare to see a mortgaged property go to auction. #1 most people with a mortgage escrow taxes and insurance, so lender pays them. If for some reason the owner is had that period where a few lenders allowed them not to escrow, then it can happen, but what I see most is those get paid day of sale and I mean the day of sale....very rarely do I see them get paid early....and then they don't actually get auctioned.
Also I normally would not buy a property that has a mortgage at tax foreclosure sale. Yes in theory that mortgage gets wiped out, but do you really think Big Banks let their properties have $100K-200K-300K-500K mortgages wiped out at the foreclosure sale. Possible, but my guess is they lawyer up, say they weren't notified, and somehow get the property back. Occasionally one may slip thru, but I don't think that is common. I guess I've been doing this about 5 years now and never seen one I liked with a mortgage actually get all the way thru the sale.