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?
The lender can bid up to the total amount owed, including fees and costs, or it may bid less. In some states, including Pennsylvania, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. If the lender is the highest bidder, the property becomes what's called "Real Estate Owned" . Auctioned foreclosures don't usually allow buyers to get inside the home, let alone have it inspected.
Clearing the tax lien means paying the back taxes plus any interest, fees, and costs due. Depending on state law, this period may be as short as a few months or as long as a few years. The word foreclosure probably makes you think of a bank selling a home or other real property because the borrower fell behind on mortgage payments. That is the most common type of foreclosure, but it’s not the only one.
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Even when there is a redemption period available, interest and other fees can rapidly increase the outstanding balance. So, it’s important to act quickly when you receive a notice of delinquent property taxes. If you’re behind on property taxes, contact your county as soon as possible to find out whether they offer assistance or if you can delay your property taxes or enter into a payment plan. For instance, if the homeowner sells the property, the mortgage lender gets paid first. The same is true if someone sues the homeowner and gets a lien on the property. That means the mortgage lender would get the first $50,000 if the home was sold.
Consider talking to one of Clever's recommended agents to see how they can help you find and buy your next home. The decision to buy a foreclosed house or not depends on your circumstances and the type of foreclosure you're interested in. If you're an investor, you should probably have a contractor come out with or after your visit to provide an assessment of how much work they think needs to be done and what it will cost. This is crucial for determining the after repair value of the home which can help you determine your potential profit when reselling the home. To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal. Even in processes that involve competitive bidding, the bids are typically quite low compared to the value of the property.
Save your home from mortgage and tax foreclosure
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. This program uses federal Homeowner Assistance Fund money to help Pennsylvania homeowners make mortgage payments and pay other housing-related expenses so they can avoid foreclosure. Whether the property is sold to the county or to a private bidder, the property owner has 12 months to redeem the property. Property is redeemed by paying the amount paid at the tax sale plus taxes paid on the property post-sale, any special assessments on the property, and a premium. The premium is 20% of the amount for the first year, plus 10% for each additional year. Under Georgia law, the property may be redeemed by the property owner or by another interested party, like the mortgage holder.
Under Pennsylvania state law, Pennsylvania National Guard members on active state service and 30 days after that are exempt from civil process. A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Of course, if you're able to work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.
We recommend buyers who are in a hurry focus on pre-foreclosures, as those are more likely to close quickly and allow for conventional financing. Due to the Protecting Tenants at Foreclosure Act, investors who buy properties with tenants in place must honor the original lease. Anyone who intends to live in the home must give the current tenants at least 90 days to vacate the property.
So, don't get caught off guard if you're a Pennsylvania homeowner who's behind in mortgage payments. Learn about each step in a Pennsylvania foreclosure, from missing your first payment to a foreclosure sale. Once you understand the process, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible. So, it's possible that you could purchase a property below fair-market value, but it's not quite as likely or easy as it would be in other states with simpler deficiency judgment laws. If a property doesn't sell during the pre-foreclosure period, it goes to foreclosure auction. Pennsylvania law requires that all foreclosed properties must go through a public auction before becoming real-estate owned .
So you don't need to worry whether the owner of the property has the legal right to sell it to you. For instance, notice requirements and redemption periods vary. It’s important to educate yourself about the specific timelines and procedures in the state where your property is located. The buyer pays the tax, all accrued interest, an advertising fee, a certificate fee, an auction fee, and any premium amount the buyer bids. The highest bidder receives a tax lien certificate that includes the taxes, plus the other fees.
Listing information is from various brokers who participate in the Bright MLS IDX program and not all listings may be visible on the site. Some properties which appear for sale on the website may no longer be available because they are for instance, under contract, sold or are no longer being offered for sale. Property information displayed is deemed reliable but is not guaranteed. Copyright 2022 Bright MLS, Inc. (/info/mls-disclaimers/#mls_5632) The listing broker’s offer of compensation is made only to participants of the MLS where the listing is filed.
A "conciliation conference" is a face-to-face meeting between the lender and the borrower to reach a workout and avoid foreclosure. Potential outcomes of a conciliation conference include a loan modification, repayment agreement, forbearance agreement, short sale, or deed in lieu of foreclosure. In many states, concerns over title issues are common when buying foreclosures. Pennsylvania law, however, requires lenders to run a title search to make sure the home is free from other encumbrances before they can request a foreclosure suit.
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