WHAT HAPPENS TO THE MORTGAGE IN A TAX LIEN SALE?

In most cases, houses have more than one lien stacked on top of them, but what happens to the mortgage in a tax lien sale? You may be surprised by the answer. Find out what the county does about the mortgage.

I have a lot of good news for you today. You’ll learn the rules of this government-controlled and mandated tax lien and tax deed auction business, and you’ll find them clearly laid out and easy to understand.

Today I’m answering the question, what happens to the mortgage in a tax lien sale? 

I’ll share with you a surprising advantage you’ll have over other investors who don’t know about the tax lien certificate or tax deed auction rules.  

WHAT HAPPENS TO THE MORTGAGE IN A TAX LIEN SALE? – A 200-YEAR-OLD-BUSINESS

The good news is this business has been around for 200 years, and it is administered and mandated by the individual state governments and local counties.  

It works like this.  The state legislature mandates and creates the laws, including the procedures and the rules on how property is taxed and how the money from the taxes will be collected. 

Before I get too deep into this, I want to mention that I have a free gift for you that you won’t want to pass up.

WHAT HAPPENS TO THE MORTGAGE IN A TAX LIEN SALE? – THE SECOND LIEN

So, let’s talk about what happens to the mortgage in a tax lien sale.  

Are property tax liens superior to mortgages? Yes, the mortgage is usually the second lien on the property. 

If the property owner does not pay the property tax, the county will take action to collect those property taxes.

The defaulted nonpayment of property tax sets off an alarm at the county offices, and the county treasurer will immediately begin sending notices of property tax default to the property owner.

This process of notification will continue up until the auction on the courthouse steps. 

WHAT HAPPENS TO THE MORTGAGE IN A TAX LIEN SALE? – PROPERTY OWNERSHIP

Owning property in the United States is a privilege given to all citizens. Property owners have privileges to subdivide the land, rent it, grow crops, raise cattle, and do just about anything that is legal.  

However, property owners must pay property taxes. It’s the law of the land.

The county treasurer needs that money to pay the police and sheriff departments, to build schools and pay teachers, to pay the fire fighters and dozens of other bills. 

Unpaid property taxes will cause the treasurer to place the property on a tax lien auction list.  

This simply means the county treasurer needs to and will notify the property owner, and the official treasurer will deliver a notice of default. 

These notices are the legal due process of law, and they explain the consequences of nonpayment to the property owner. 

WHAT HAPPENS TO THE MORTGAGE IN A TAX LIEN SALE? – TAX DEFAULTED PROPERTY

If taxes are unpaid, the property owner forfeits the property to the local county. Follow along, and you’ll see how all this could make you the beneficiary.  

The county treasurer will issue a default notice on each delinquent property, though the property owner will remain on the property.  

The treasurer will put the property on a list of tax defaulted property and will issue a tax lien. 

Ultimately, if the taxes are not paid, the property could be sold at a tax defaulted property auction.  However, during the interim, the tax collector or treasurer will issue a tax lien certificate. 

Thousands of tax lien certificates are issued in every state.

WHAT HAPPENS TO THE MORTGAGE IN A TAX LIEN SALE? – TAX LIEN CERTIFICATE

The county will sell a tax lien certificate at auction. Tax lien certificate auctions are listed in the newspaper and on the county website. 

If the tax lien certificate is paid, the property owner has not been evicted, and everything returns to normal.

If the tax lien certificate remains unpaid, the purchaser of the tax lien certificate will receive a deed to the property.     

In the latter case, the tax is defaulted. Therefore, the tax lien certificate owner becomes the new property owner and will owe taxes in the future to the county.   

WHAT HAPPENS TO THE MORTGAGE IN A TAX LIEN SALE? – THE MORTGAGE

Many properties will have mortgage loans.  Those loans and other loans and judgments will be removed from the official county records if the taxes go unpaid. 

The tax lien certificate purchaser will receive a property with no loan and no judgments.

The new purchaser will now own a property free and clear of mortgages and judgments.  

In approximately half of the states, the county will collect taxes by using a tax lien certificate. In the other half of the states, the county will confiscate the property and sell the property at auction.  

In both instances, the county government clears the mortgage or deed of trust from county records, and the county clears other judgments.  So the new owner receives a property free and clear of any mortgage.

CONCLUSION

What makes purchasing property at a tax lien sale such a great bargain is that the county is only interested in recouping the back taxes, which are very low, mere cents on the dollar.

So what happens to the mortgage in a tax lien sale? The county wipes it out. The property is cleared of any loans and judgments, and you end up taking possession of tax sale property that has no mortgage.

Keep in mind that 95% to 97% of homeowners with delinquent property taxes will pay. In that case, you receive all your money back plus outrageously high interest, up to 36%, but you don’t get the property.

However, if they don’t pay, then you get the property without any mortgage.

Tax lien certificates and tax defaulted property investing are highly lucrative if you know what you’re doing.

For over 25 years, I’ve been teaching students how to do this successfully, and many of my students have gone on to become 6-figure income earners within a year of completing the training.

I offer full support and a complete training with home study courses, Q&A sessions, live tutorials, workshops & web classes, and personal coaching.

If you want to learn more, I can teach you how to make profits you’ve only dreamed of from tax lien and deed investing. Get on the fast track now with my FREE Master Class. It costs you nothing, so why wait?

Ted Thomas is not an attorney, real estate broker, or a CPA.


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