Mortgages on Tax Sale Property

Subscriber Question - Mortgages on Tax Sale Property

Rick everything you said sounds wonderful, my only issue is mortgages on tax sale property.

Getting a deed for little to nothing is great, but how do I know if it is free and clear. I'm concerned about mortgages on tax sale property. I would hate to purchase a property for $200 and still have to pay liens and maybe a mortgage.

DeedGrabber's Answer:

My ebook (available here) explains that in detail. But here's the answer:

First, realize that liens and mortgages on tax sale property ARE NOT wiped out when we buy such a property from the owner. Luckily, most properties in the later stages of tax sale are free and clear. But we need to look out for mortgages on tax sale property because they occasionally do pop up.

With that said, if you buy a deed to a property for $200, that does not automatically obligate you to pay liens, judgments, mortgages on tax sale property, etc. They are attached to the property and former owner only.

Mortgages on tax sale property are rare.

Mortgages on tax sale property are unusual - banks keep mortgaged property from reaching the auction.

I would not RECORD the deed until you've done a title report to screen for mortgages on tax sale property and see if you're going to be able to come out of it OK. However I would grab the deed for $200 immediately before the owner changes his mind.

Of course you will still have to take care of any liens/mortgages on tax sale property in order to make a profit. But you can use the upcoming sales proceeds from your buyer to pay for these.

Mortgages on Tax Sale Property May Not Get Paid!

Also you will need to have in your purchase agreement that the owner understands you will not be paying mortgages on tax sale property unless you can sell the property for a profit. Never agree to be responsible for, or pay for, mortgages on tax sale property unless you are 100% positive you'll be able to pay these off profitably.

But usually, the debtors of mortgages on tax sale property have already let it go anyway to foreclosure in their own minds - they usually don't care.

The most you can lose is your $200 (and eventually the cost of a title report) and I actually quite often do. Not a problem with a $10,000+ check rolling in once in a while. Since a title report
costs almost as much as a $200 deed, my philosophy is to get the deed first.

Also the owner will tell you the truth 90% of the time about any mortgages on tax sale property and you can keep from doing the deal in the first place if the mortgage balance is too high. Most of these properties don't have mortgages anyway - mortgages on tax sale property that is reaching the sale, are rare.

In most cases, the bank would have paid the taxes off by now themselves to protect their investment.

Plus, in some counties you can go to the county recorder website and search for mortgages yourself before you even send the $200.

Doing this will not ensure that there's not mortgage, but if you do find one you can clear up that matter before you risk even $200.

Hope this helps, this is not legal advice, just my experience.


That's a great question, subscriber. It's a common misconception that getting a deed to a property obligates you to pay liens and mortgages on tax sale property you buy from the owner. In 99.9% of regular transactions, the owner would take care of these before the sale or at a minimum the buyer would promise to pay them off.

But we're not doing regular transactions, and we're not dealing with regular owners. We're DeedGrabbing!

Got a question of your own? Email me!

The DeedGrabber

P.S. In case you're wondering, my opinion is that DeedGrabbing is completely legal, moral, and ethical, because you are telling the seller exactly what you will and won't do upfront, and there is
no trickery involved! Most other systems I've studied advocate some form of seller manipulation and I'm no good at that, or tell you to take over mortgages on tax sale property, which will get you in trouble quick!

Anthony Hasfal December 10, 2011 at 1:59 am

Why don't you be straight with the answer to the question of Mortgages on tax sales property. Just answer without going around the bush to sell an ebook. If the property is sold by tax deed it may mean that the morgage gets wiped away, depending on the state. Give direct answers. Please, instead of writing a lot of crap..just get to a yes or no answer ok..Gee!!

Rick Dawson December 10, 2011 at 5:30 pm

Nice attitude!

It wouldn't be too smart to give a yes or no answer when, depending on the area and the situation, the answer could be yes or no!

Good luck to you - with your attitude you will need all the help you can get.

Leah January 24, 2012 at 9:56 pm

I am appalled by your attitude and aggression. It is totally uncalled for. The answer Rick gives is a very informing one if you care to read it again and seek further clarification if you do not understand still. You can learn a lot more by humbling yourself.

Schneequa December 22, 2011 at 10:32 pm

Hi Rick, I've heard that it is possible to obtain a title report from the county because the property is already delinquent and it is considered "public records" Is this true? Would you happen to have a sample of the contract that you mentioned above?

Rick Dawson December 23, 2011 at 3:11 pm

If the county is responsible for noticing the owner and lienholders of the tax sale, then generally they will need to order a title report to see who they need to notice. And, there shouldn't be any reason why that title report would not now be available by public records request. Don't try to scan all of these in advance, it's too much work and you'll frustrate the employees ordering dozens of title report copies. However take advantage of requesting them when you have a deal in the works and the owner has already indicated that the property is clear.

Keep in mind that in some states, like Indiana and Illinois, the buyer of the tax lien is responsible for noticing and orders a title report privately. This obviously would not be available to you unless the buyer has to file the report somewhere in advance.

Debbie March 30, 2013 at 2:48 pm

Rick, I so enjoyed reading ur wealth of knowledge on tax foreclosures etc... u r very spot on with your information. Thank u so much for having the spirit of sharing. I will purchasing ur e-book. Keep doing what u r doing because u r doing it correctly by helping so many people with ur knowledge. God bless ur business.

Kekay February 4, 2014 at 11:39 pm

What happen's to a property that has a mortgage that is up for tax deed sale

Rick Dawson February 7, 2014 at 9:15 am

If the property goes through the tax sale the mortgage is wiped off. If you buy it before, it's not. Many properties you buy before the tax sale don't have mortgages.

Jeanni September 4, 2014 at 6:29 pm

Rick & Debbie. Where I live in Pennsylvania, there are 2 tax sales. One happens in September, and is call an Upset Sale. Mortgages and liens are NOT wiped off at this sale. If you buy a property with a mortgage it comes with it! 2 months following is a Judicial sale, and if a property makes it to the J sale the mortgage and liens are wiped out. It's not possible to give a blanket yes or no to the question. The states, even counties, have different rules.

What I would like to know is: if you buy a property at a tax sale with a mortgage on it, will the bank call it due when they find it changed ownership, or can you continue to pay the mortgage and keep the property? I mean, if the mortgage is low enough, maybe it's not a bad strategy for those who have trouble getting mortgages.

Rick Dawson September 11, 2014 at 8:37 am

Yes, years ago it took me a while to straighten out that whole Pennsylvania system in my head - they have a lot of different methods in play there. Actually PA has 3 types of tax sales, there is Upset, Judgment, and Repository Sale. This is the least exciting of the three to me, as it's stuff that people didn't want to buy for minimum at the judicial sale, even free of liens.

To answer your question directly, I think in today's environment, with the loan crisis not far behind us, few banks would take action to foreclose a performing loan where property changed ownership. However, it is in their right to do so most likely, and should interest rates rise sharply in the future, you can bet they will be looking to get paid off on any of their low-interest-rate loans outstanding that are being originated today and the last few years.

I think you should get good at title searching, and then bid on houses at the first sale that you know are free of mortgages. Though competition will still be against you, the fact that any liens stay attached to the property scares away a LOT of the competition - so that's the competitive advantage I'd try to take advantage of, if you could learn to search titles quickly and accurately.


It's too easy to get a property that has no mortgage on it, to aim for getting a property WITh a mortgage on it, whether or not you'd have a chance of being foreclosed for changing title.!

linda March 20, 2016 at 2:53 am

I bid $200 at a tax deed sale. the property and 4 bedroom mobile home have been up for back taxes since 2009. I find out in may if the judge accepted my bid. the back taxes were $4500 but there is a lien on property. the owner reassured me the lien was $2500. This is in pa. will i be responsible for paying lien?

Rick Dawson March 21, 2016 at 6:01 am

It depends - what kind of sale was this?

If upset sale, then yes it will still be on there.

If it's one of the two later sales, it should be wiped out. I'm glad you only bid $200.

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