Tax Lien Foreclosure

6 Replies

I am about to close on my first flip and am eagerly looking for another property. I'm interested in a SFH in my area that is listed as a tax lien foreclosure. Am I responsible for paying for the lien along with the price of the house? Is there anything extra I need to know before I buy a home with this type of lien?

If the right of redemption has been foreclosed through the tax lien foreclosure process, the property is free and clear. 

Buy owners title insurance. If your purchase cannot be insured, be wary.  

@Lavada Lindsey without more details it is unclear.  

In any transaction the contract sets the terms and determines who is responsible for what expenses related to the transaction.   Normally a contract will say something to the effect of "Seller provides fee simple title free and clear of all liens and encumbrances"  So in most contracts and therefore most deals the Seller is responsible for any bills related to the property prior to settlement and the Buyer is responsible for all bills after the settlement.

Thank you, Ned. So, if it's a typical contract seller will be responsible for costs incurred before the sell of the property. But after reading this I am going to be extra careful when reading over the contract.

@Tom Gimer hi tom I have been following a tax lien case where the town has hired a law firm to foreclose on the right of redemption. The original owner died and has no relatives family or children to probate his property. After speaking with the law firm it sounds like they may have a judgement from the court soon which would give the town the ability to auction the property. 

My question is about the mortgage lien on the property. If the town forecloses what happens to the lien? I believe the law firm has served them notice of the tax lien foreclosure case but what recourse do they have at this point? Can they try to foreclose before the town does so they can attempt to collect on the debt at auction?

You'll need to research local law on lien priority. In most (if not all) jurisdictions RE taxes have super-priority so if that is the case where your property is located, if the lender is given notice of the suit to foreclose the right of redemption, the lender's lien would be extinguished by the order foreclosing that right.

One option the lender would have is to pay the taxes and then foreclose the mortgage lien.

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