Investor · Decatur Atlanta, GA · Member since 2011 · 611 posts · 232 votes
I've been contacted by a seller that has a tax lien on their property. They have 11 more months to pay it off the tax plus the 20% the County tacks on. My question is should I just get it under contract and the tax lien would be paid for by me through the closing attorney? The price I'm talking to the seller with and the underlying value of the home makes this well worth it if I can get it.
@Kevin Polite, if they have unpaid taxes, there is a good chance they have other liens too. Ask the seller if there are any other liens on the home (second mortgage, mechanic's liens, township tax, school tax, city tax, municipal lien for water or sewer, any assessments or other liens against the property). If the answer is "yes" then you need to find out how much. First, call the county and find out how much. If the amounts are low enough that the deal still makes sense, then get the home under contract (assuming you haven't spent any money on any of this and assuming it takes just a few minutes to do - I have no experience in this area).
Then pull title and check that you haven't missed anything (this step will cost you $150 or so). If title comes back clean (apart from the known items), you are in good shape!
@Kevin Polite, if they have unpaid taxes, there is a good chance they have other liens too. Ask the seller if there are any other liens on the home (second mortgage, mechanic's liens, township tax, school tax, city tax, municipal lien for water or sewer, any assessments or other liens against the property). If the answer is "yes" then you need to find out how much. First, call the county and find out how much. If the amounts are low enough that the deal still makes sense, then get the home under contract (assuming you haven't spent any money on any of this and assuming it takes just a few minutes to do - I have no experience in this area).
Then pull title and check that you haven't missed anything (this step will cost you $150 or so). If title comes back clean (apart from the known items), you are in good shape!
Yes get it transferred to your name them go pay off the back taxes.
We just did this and paid the person $300 for the house because they were not planning on redeeming the house. They could not afford what they owed in taxes.
@Paul Birkett I did a preliminary search myself as I have access to County Clerk records and I didn't see anything else. There is no mortgage either. My only concern about any lien would be that from the County because the house was torn down through In Rem. I've got a call into the County so hope to know more about that tomorrow.
@John Underwood thanks. They are surprised they can get any money so it'll be sweet if it works out.
@Kevin Polite - that's fine but not sufficient. You need to get a formal title report to see what else is going on. Also, check that there are no building code violations if the home is in poor shape. You may only be concerned about county liens but there could be others that are not recorded (yet). You don't want to wait to get to closing and find issues later
Generally most purchase contract say the seller transfers "Free and Clear liens and encumbrances" title. That means any liens or debts secured by the property are paid off out of the seller's proceeds at time of the settlement.
Of course this is negotiable. You could offer less and pay the taxes or other bills on your side of the transaction. This makes sense if some of the debt attached to the property is negotiable. You would get the benefit of any savings.
A tax lien is not different than any other debt against the property like a mortgage. It just gets paid off at settlement. The only difference is there is s timeline you must meet but it sounds like this guy has plenty of time to sell.
@Ned Carey Does it matter if the property has been purchased by somebody at the auction but still within the redemption period. Property is in Prince Georges.
However of a foreclosure has been started you have to get the deal done before the property closes. More than once I have foreclosed on a property under contract and nobody paid the taxes before the settlement. Also consider if someone starts foreclosure you could have additional legal fees due in addition to the taxes.