How Does A Tax Lien Foreclosure Work?
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If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment and order your home sold at auction. A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender gives notice of the suit by serving you a summons and complaint. If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, which will allow it to hold a foreclosure sale.
Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower. While there are some common threads, the actual procedure for a tax lien transfer varies significantly from state to state. A tax lien gets “super priority,” and if the homeowner doesn’t pay the property taxes in the time allowed, ownership of the property is simply transferred to the municipality. If the property owner can’t clear the lien within the redemption period, the process moves forward. In some states, the deed to the property is automatically transferred to the lien purchaser when the redemption period expires.
What Is a Tax Lien Foreclosure?
We have done extensive research to locate and verify this information, and we have also consulted one of our top agents who has experience buying foreclosures in writing this piece. Due to the Protecting Tenants at Foreclosure Act of 2009, you're required by federal law to honor the lease for tenants in a property if you buy a foreclosure and intend to rent it out. If you plan to live there, you still need to give them 90 days to vacate. The major benefit of buying a foreclosed home is the possibility of getting it for below market value. Most sellers are in a tight place financially, so savvy buyers can leverage that situation to negotiate lower sale prices.
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A property tax lien is a lien placed on real estate when the property taxes haven’t been paid. Unlike other types of tax liens, the property tax lien is usually only attached to the property that has unpaid taxes. It generally means other property is safe from collection relating to the tax lien. IDX information is provided exclusively for personal, non-commercial use, and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.
The certificate gives the buyer the right to collect the back taxes with interest and certain costs and fees. For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau website. REOs are good properties for buyers who want to avoid taking advantage of distressed sellers or the risk of buying site-unseen homes at an auction.
Save your home from mortgage and tax foreclosure
If they weren’t able to pay the original balance, it only gets harder as the balance grows. The interest charged by the investor, along with other fees and costs, can significantly increase a tax bill. A debt of a few hundred dollars could be in the thousands by the time the redemption period expires. In a foreclosure, the borrower's total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $400,000, but the home sells for $350,000 at the foreclosure sale. In some states, the lender can seek a personal judgment against the debtor to recover the deficiency.
Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. Pennsylvania law doesn't provide a post-sale redemption period. The federal Servicemembers Civil Relief Act provides legal protections to military personnel who are in danger of foreclosure.
Each year, there are billions of dollars in tax lien foreclosures around the country. Before officially starting the foreclosure process, Pennsylvania law requires the lender to give you a 30-day notice of intent to foreclose, providing the opportunity to cure the default. The mortgage lien holder would get the full payoff balance of $50,000. In this case, the homeowner’s share would be approximately $40,000. That’s far less than their equity in the home, but much more than most homeowners actually receive after a property tax sale.
Depending on where the property is located, past-due property taxes may lead to a tax lien foreclosure or a tax deed sale. The tax lien foreclosure process includes some additional protection for property owners. If your property taxes are delinquent, you could lose your property to a tax lien foreclosure or tax deed sale—even if your mortgage has been paid in full. Tax lien sales present a special risk for homeowners, mortgage lenders, and other lienholders. That’s because the property tax lien takes priority over any other lien.
It may be as simple as making a request to the local taxing authority. In other cases, judicial foreclosure proceedings may be required. In most states, the property owner has a right of redemption. That means there is a period of time that the homeowner can clear the tax lien.
You can also find this information on your monthly mortgage statement. Learn how a Pennsylvania foreclosure works, including preforeclosure steps, foreclosure procedures, and homeowners’ rights under both state and federal laws. Auctions can't be scheduled until the foreclosure process is complete, and they can be postponed up to another 100 days after the initial scheduled date.
Some homebuyers feel like they're taking advantage of someone else's misfortune when they buy a foreclosure. In this case, the peace of mind outweighs the potential profit you could achieve by purchasing one of these homes. Buyers should contact the auction's trustee for specific instructions on minimum bids, bid increments, and how to submit offers. In every homebuyer's journey, there's a point where they ask themselves if they should buy a foreclosure and save some money. With median Pennsylvania home prices up 10.07% in the past year and mortgage interest rates on the rise, finding an affordable foreclosure seems increasingly appealing. Clever’s Concierge Team can help you compare local agents and find the best expert for your search.
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