TAX FORECLOSURE

Comments(8)

• 
  edmeyer7th December, 2004

  If this is a Tax Sale, it will wipe out the existing mortgage. If the amount owed in taxes is small compared to the size of the mortgage it is almost a certainty that the mortgage holder will cure the tax default and likely start a foreclosure action of their own.

• 
  mas11ter7th December, 2004

  Thanks for the reply. So your response suggests that I should bid something higher than the mortgage balance plus the taxes but lower than my maximum acceptable price?
  
  Also, what does cure mean exactly? Do mortagors have a right of redemption as well?

• 
  mas11ter7th December, 2004

  Thanks Ed. I've tried the internet searches, and all I seem to get are websites hosted by fellow investors wanting to purchase props!
  
  Hmmm... Interesting. The taxes due are significantly lower than the existing mortgage, but together are only about 50% of FMV of home. The case has been active for over a year. The mortgage is held with a small town bank, and they haven't made a move to cure yet. Sale is in a few weeks. I was supposing they'll bid in their balance due on the mortgage.
  
  I'll inquire re: the deed and sub to's tomorrow. Do you think that the homeowners would have to redeem only the taxes, or also the mortgage, assuming I bid in both?

• 
  edmeyer8th December, 2004

  An internet search revealed a document used in one county here in CA that is entitled "CLAIM FOR EXCESS PROCEEDS FROM THE SALE OF TAX DEFAULTED PROPERTY". There are three categories of elegibility.
  
  1) Lienholder of record prior to recording of tax deed to purchaser
  
  2) Assignee of a lienholder of record prior to recording of tax deed to purchaser
  
  3) Any person(s) with title of record to all or any portion of the property prior to recording of tax deed to purchaser.
  
  It would seem that mortgage holders would qualify to claim funds that are beyond those used to pay off the tax debt-- at least in Eldorado County,CA

• 
  edmeyer8th December, 2004

  Additional internet research indicates that my previous post applies to counties in CA and may not apply elsewhere. The few out of state sites that came up predominantly indicated that excess proceeds go to the previous owner.

• 
  mas11ter8th December, 2004

  Ed,
  
  Thanks so much for the research on my behalf. I spoke with the tax attorneys today and they did confirm that the lien would be wiped out at foreclosure. They hinted to me that I should read the mortgage, which says this:
  
  Protection of Lender’s Rights in the Property. If Borrower fails to perform the covenants and agreements contained in this Security Instrument, or there is a legal proceeding that may significantly affect Lender’s rights in the Property (such as a proceeding in bankruptcy, probate, for condemnation or Forfeiture or to enforcc laws or regulations), then Lender may do and pay for whatever is necessary to protect the value of the Property and Lender’s rights in the Property. Lender’s actions may include paying any sums secured by a lien which has priority over this Security Instrument, appearing in court, paying reasonable attorneys’ fees and entering on the Property to make repairs. Although Lender may take action under this paragraph 7, Lender does not have to do so.
  Any amounts disbursed by Lender under this paragraph 7 shall become additional debt of Borrower
  
  I think this means that the lender has a contractual right to redeem if necessary, but that they may wait until the sale to see how much the property brings to do so. I called a separate attorney for guidance and he agreed.
  
  So I am thinking I'll bid mortgage balance + taxes, and hope that the defendant doesn't redeem. I've noticed that they've had several recent actions against them resulting judgement (credit cards) so maybe they won't come up with the cash.
  
  Also, since the judgement was a default one, the clerk does not have to notify them of sale, etc. so maybe time will be on my side.
  
  Am I missing anything? And again THANKS for the help, I wouldn't have pursued this far without you...

• 
  mas11ter8th December, 2004

  Or they'll file bankruptcy.

• 
  edmeyer9th December, 2004

  From what I found earlier, the lender will likely act before the sale since his lien will be wiped out by the tax sale and lender may not have right of redemption in Ohio. Since the delinquent tax is small the lender will probably pay the tax and file a Notice Of Default (or whatever is used in Ohio) on the loan. Since there is plenty of equity the lender will be able to protect the loan by doing this. Keep us informed as to what transpires.
  
  Regards,
  Ed