Thread: Will a lender accept a shortsale if haven't paid your taxes?

just know lenders aren't that dumb, if they feel threatened by a tax lien they will simply pay you off to get you out the way. Plus if you are somehow able to foreclose on the property, they will buy the house back to cover your tax lien where you will only get interest for the amount of time you had the lien to their mortgage balance.

whoever is selling those tax lien courses are forgetting to mention they only work with free and clear houses. no lender in their right mind will let a tax lien prevail over the mortgage, its just not going to happen.

if you want to invest in tax liens the way you mentioned, all you want is a return on your money. in my state the interest one can collect on tax liens is around 8%. doesn't seem to attractive now does it?

Hello,

First, I assume you are the seller of the home since you refered to it as "your" home and second, I assume we are talking about property taxes. Provided that you have not passed the redemption period for paying the past due taxes, in which case you would no longer own the home, then the existence of unpaid taxes or any other lien, in and of itself, would not prohibit a short sale.
However, the amount of the lien might. The holder of the mortgage will look at what they are likely to "net" from the sale. They will view the cost of paying off the lien as an additional shortfall, less money they will recieve, since the property taxes will have to be paid out of the proceeds of the sale. In a sense it is no different than if the offer had been a lower price. The advantage of the lien being one for property taxes is that it would also have to be paid if the bank chooses to foreclose. I hope that helpes

what i meant when i said the lender will buy the property back is if the tax lien holder forecloses, the lender has the option to buy the property back. all they have to do is bid the price up to cover the tax lien and their mortgage and they have the property back.

so the tax lien holder will only get their investment back and maybe a few months of interest.

Based on short-sale experience, the bank always pays the balance of the taxes.

I had a short-sale where the bank paid over 2 years of taxes. They really took a beating on the deal, but they had no choice.

Hope this helps.

The reason is generally people escrow their taxes and insurance. If you are not paying your mortgage payment, then you are not paying the escrow fees as well. The bank WILL pay them and charge them back to you. If the home goes to short-sale or foreclosure, a free and clear title is always issued to the new owner.

They will find out sooner or later, and it is only more proof that you need a short sale. In fact the threat of losing the home to the tax man is great motivation for lenders as the tax lien is senior to the mortgage.

Originally Posted by REbuyersgroup

The reason is generally people escrow their taxes and insurance.

This is a very good point. Most borrowers pay into an escrow account and the tax bill is paid directly by the lender. That's because tax liens take priority over other liens. So lenders are VERY interested in making sure that property taxes are up to date....

Of course that doesn't always happen. And tax sales seem to be gaining in popularity on the late night get-rich-quick infommercials. What many fail to realize is that paying off a tax lien does not obliterate other liens (including mortgages) on properties.

Lenders will know if the taxes are paid or not when they get the title search back. It is all factored into the equation. So, yes even if you are behind on your taxes banks will consider a short sale.