I’m Ted Thomas, and today I’m answering your question, “Does a mortgage survive a tax deed sale in Florida?”
First of all, I’ll give you some tips on earning money. Once you understand what I’m about to tell you, you’ll see a big money maker.
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Most properties will have a mortgage because people finance. About 50% of all properties will have a mortgage.
Unfortunately, people have crises in their life, so they might not pay the mortgage. If they don’t pay the mortgage, they could lose the property.
The Primary Lien on the Property
The tax man has a lot to say about this. I’m talking about the local county, which has a property tax lien on the real estate.
That property tax lien is the most powerful lien on any property. It’s the 1st lien, the primary lien. Let me explain that.
The Tax Number
When the property first became a subdivision, they gave it a tax number. That number stays with it forever.
The tax number has power because even though the IRS can file a federal tax lien or Bank of America can file a mortgage, it doesn’t matter.
The first absolute lien on a property is going to be the property tax lien.
How Lien Priority Works
The question that we’re answering today is, “Does a mortgage survive a tax deed sale in Florida?” The answer is no.
Nothing survives the tax defaulted auction except, possibly, another government lien, and it must be filed by date and time.
If that sounds kind of crazy to you, let me give you a little in-depth background.
Now, I’m not an attorney or a CPA, I’m just an average investor who started out learning this. I’m a capitalist, and I want to make money. So, I learned the step-by-step process.
I’ve been doing this for over 30 years. The first 5 years with just investing and 25 years not only investing but teaching people how to do it.
What Happens to Subsequent Liens?
The tax lien is the first lien. It’s called a property tax lien. If the Bank of America wants to file a lien on that property because of a mortgage, they’ll do exactly that. So, they file a lien on the property, and it’s registered with the county.
If the tax deed auction takes place, since the county lien is the first lien, it will wipe out the mortgage.
How can it wipe out the mortgage? The state law gives it the authority to wipe out the mortgage via due process of law.
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Due Process of Law Regarding Liens
To wipe out that mortgage, the county sends notices to the bank and everybody else on the title.
If an attorney had filed a lien on your behalf because someone owed you money, there would be a lien on the property.
Now your lien has been wiped out, but before it was wiped out, you received a notice from the county that said, “This property is in tax default. If someone doesn’t pay the taxes, then your lien will be wiped out.”
Anybody and any entity that has a lien will have it wiped out.
The only thing that may survive a tax deed will be another government lien of some kind.
Notifying the Bank
Those of you who are attorneys or savvy real estate people are probably saying, “Wait a minute, Ted. The bank doesn’t have to get wiped out. They could pay the tax.” That’s absolutely true. That’s why everybody is notified. So, let’s talk about the banks.
They don’t want any risk at all. If you try to get a bank loan, you have to sign over your 1st and 2nd born to get that loan. They want to lend money on properties when they know they can sell them and do okay.
When the notice comes from the government, it comes as a registered letter that says, “If you don’t pay the tax, there’s going to be an auction and we’re going to take over the property.”
Mortgages, Deeds of Trust and Security Deeds
Keep in mind, in the Western states they don’t call them mortgages. They call it a deed of trust.
In the Southern states, they’ll call it a deed of trust or a security deed. They’re all the same thing, just an IOU. You owe the bank money, and you sign for it.
In the East, they call it a mortgage.
Covenants in Bank Loan Contracts
The bank can pay the tax that’s due, then the bank will have a priority lien. With a mortgage, they don’t have a priority lien like the tax lien.
Every mortgage has 3 covenants. This is important. Covenant just means promise, and you make 3 of them when you sign a mortgage.
1) You say you will make the installments.
2) You will pay the taxes.
3) You’ll pay the insurance.
Every bank loan has those 3 covenants. If you don’t pay any one of those 3, you have violated the bank loan.
Because of this violation, the bank will foreclose on the property, but they have plenty of time now because the taxes are paid.
Foreclosures can be 21 days in Texas, 100 days in California, or 60 days in Oregon. Every state has a different foreclosure time.
The Tax Lien
The number 1 lien is always the taxes. If the bank or anybody pays the tax, they can then foreclose on that property. However, it takes time to do that.
You buy time when you pay the taxes. Just like a tax lien, you pay someone’s taxes, and you give them time.
Time solves all real estate problems.
Does a mortgage survive a tax deed sale in Florida? The answer is no.
The tax lien is the first lien on the property, and subsequent liens and encumbrances are extinguished. Only another government lien may possibly survive a tax deed sale.
If you’d like to know more, Ted provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!