tax deed with a mortage California question

[Simon Qu]

Hi Everyone,

I am interested in a property at a tax deed auction. The property is not in foreclosure but has a mortgage on it. This means the property owner has been paying the mortgage and not the due taxes for so unknown reason I am not able to find. Anyone have any experience with this? Any problems I should look out for?

any help is greatly appreciated. Thanks

[Kyle J.]

First, just because the property isn't in foreclosure doesn't necessarily mean that the owner is current on their mortgage.  All you really know at this point, without further research, is that the owner is five or more years delinquent on their property taxes (because it has to be at least five years delinquent to go to tax deed auction in California). 

But regardless, the mortgage would no longer be secured against the property if it were to be sold at the tax deed auction so you wouldn't need to worry about that.  There are other types of liens/encumbrances that could/would still remain on the property, such as IRS liens, liens for special assessments from any taxing agency that doesn't consent to the sale, unpaid Mello-Roos taxes, etc. 

Another thing you'd definitely need to watch out for is any past/pending code enforcement actions on the property.  The tax auction doesn't postpone or affect any of those.  So, for example, if a property has an illegal/unsafe addition that code enforcement is aware of and wants torn down, then they're still going to want it torn down after the auction and that's something you'll be responsible for as the new owner.

Also, what is your intention with the property?  Flip it?  Rent it?  Live in it?  You'll need to know if it's currently occupied.  There are also other considerations depending on what your intent is, especially if you plan to resell it shortly after acquiring it.

The topic is really too broad to cover everything in a single post.  I'd suggest reading ALL of the rules and disclosures provided by whatever county is conducting the auction, and also do your own due diligence on the property to find out what, if any, liens/encumbrances and/or code enforcement actions are currently on the property. 

Often times when an owner hasn't paid their taxes in five or more years, there are other things going on with the property.