property foreclosure auctions
When buying a house at a foreclosure auction, do you become responsible for previously unpaid property taxes?
Ok, so I have a little extra cash laying around, and after doing some research I have decided that I am going to attend a foreclosure auction and purchase a house, simply because you can get them for a little bit cheaper than on the open market.
When these houses are foreclosed upon by each homeowners specific lender, I would guess a majority of homeowners stop paying their property taxes. My question is, does that lender become responsbile for paying those previously unpaid property taxes, or does the lender just leave the unpaid property taxes alone and then whoever buys the house at the foreclosure auction from the lender become responsible for the previously unpaid property taxes?
I have no problem paying the auction price of what’s left of the mortgage, but the hidden costs, things such previously unpaid property taxes, are the things that scare me about purchasing at foreclosure auctions.
Anyone with any expertise in this area with advice would be appreciated. Thanks.
Ok…people answering this need to know how property taxes work before they give advice.
Property taxes “run with the land”…it doesn’t matter who is on the deed…that is why you never see old property taxes on someone’s credit report FOR REAL ESTATE because they are attached to the property and stay there until the home is sold.
In most municipalities, the property taxes ALWAYS takes first lien position that is continuous….technically when you pay property taxes, the day you pay them a lien goes against the property for the next year…so it never goes away. It just is prioritizes as “due”, “not due” or “past due”.
So the answer to your question is you should NEVER buy a foreclosed property without checking for liens the day before the auction…liens DO NOT prevent a property from being transferred…that is a myth…they just go to the person who purchases it.
If you are a cash buyer, it’s not a problem.
However, a bank won’t loan on a property without ALL prior liens being removed so they can remain in first lien position…other than property taxes.
FEDERAL TAXES DO NOT take priority on a home, that is a myth…they take the next lien position like any other creditor.
property foreclosure auctions
The Foreclosure Auction, is it for You?
Are the courthouse steps the best place to buy a foreclosure? In Jacksonville, Florida alone one company is auctioning off 36 homes on August 12th. Many investors do very well by obtaining properties at foreclosure auctions, however this process is not for the inexperienced investor or casual home buyer. If you are in the market for or interested in possibly obtaining a foreclosure you should not attempt to buy at a public foreclosure auction unless you fully understand the process. There are certain actions that must be performed by the purchaser, obligations that they must adhere to, and local laws that must be followed. For example, each state has it’s own laws that govern who can make bids on properties at an auction. Also, if you win a bid you must fully understand the terms of the sale. In many cases you are required to pay a minimum of 10 percent in cash or certified funds at the time your bid has been approved and accepted. The other 90 percent is generally due within a short time period of time after the sale. Each state has it’s own guidelines here and you must be familiar with your states guidelines.
Another issue to keep in mind is that foreclosure auctions are very competitive and move at a rapid pace. Most auctions last only a few minutes and can be very exciting to all bidders involved, however this fact often forces buyers to make a split second decision that can impact them for years to come. An experienced investor thrives in this environment however an inexperienced investor or casual home buyer can easily make a bad decision. Keep in mind too that these auctions are designed to get the maximum price for the property being auctioned. As interest is generated by the auctioneer the bidding keeps rising, in turn creating more interest which can continue to raise the price. In the heat of the competition it is not unheard of that someone overbids for a property and regrets it after the fact.
If you are new to investing or are simply looking for a good deal on your next home, foreclosure auctions are generally not the way to go. If this is the case I recommend that you work with a professional. They are many real estate agents that specialize in purchasing foreclosures. Generally these agents can educate you in the process and give you access to multiple foreclosures in your market. Your agent can also point out to you other under priced homes that might not be in foreclosure, for example short sale properties, or pre-foreclosure homes. Since the foreclosing entities like HUD, banks, etc pay your agents commission it makes no sense for you not to employ one.
If you are an experienced investor I’ll be seeing you bright and early on the courthouse steps!
About the Author
Mitchell Calvo works for HomesByLender.com specializing in educating investors and bargain hunters in real estate investing, especially foreclosure purchasing. To view Jacksonville, FL foreclosures visit the Jacksonville area HomesByLender.com site. For foreclosures nationwide be sure to visit HomesByLender.com and navigate the map to the market of your choice.
Where can I find listings for pre-foreclosures? Foreclosure auctions?
I am going to start investing in foreclosure properties. Where can I find listings for properties that are heading towards a foreclosure, or are already on an auction block?
There are several ways in which you may get a list of pre-foreclosures
#1. Buy a list from a list vendor (Everyone will have the same list)
#2. Go to the county court house, find them yourself and prepare your own list.
#3. Advertise in your local newspaper that youj purchase foreclosures
#4. Direct mail to potential clients (You sometimes get them before others)
#5. Working a farm area passing out flyers on a monthly basis or a newsletter either mailed or passed out. (You sometimes get them before others and they normally recognize your advertisement and trust you more than others because of your constant advertisements in the neighborhood)
Pre-foreclosures are the best to work in my opinion, because you are in direct contact with the person with whom you can help.
If you go to the foreclosure auctions, you have to have all cash or cashier’s check to purchase the property.
If a property don’t sell at the foreclosure auction I have been able to pick up a few by fiinding out the lender’s name writing an offer with few conditions if any along with a check or for 10% down of the offer price. In some instances you are able to pick up a few this way that are returned to the bank as an REO.
You say you are going to start in investing in foreclosures, before spending a lot of time and money into finding the foreclosures, I would invest a little time and money into what make a good deal, what to say to a client as well as how to construct the figures so you will know that you have a deal or not.
I would purchase one of the TV guru’s foreclosure package, this will give you the necessary legal forms for your use, they also have scripts you may use once you have a client. They also have the numbers and figures that will tell you if you have a deal or not.
You might also go to your nearest book store and buy a few books on buying and flipping properties. This will give you some other ideas on what to do and how to go about determining a good deal or not. You will find several books that might interest you.
I hope this has been of some service to you, good luck.
“FIGHT ON”
Foreclosure Auction in Hilo, Hawaii
