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.
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.
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! firstname.lastname@example.org
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!