Question about Lien on Upset tax sale Purchase

[Ray Slack]

Hello all my PA genius investors! 

Need some advice.  I purchased a property at Luzerne County PA upset sale and I know I'm responsible for liens/mortgages ect. 

My question is this.. there is a PA commonwealth lien from 2008 against the prior owner for Cigarettes' tax.. (I assume he owned a convenience store or something)  for $7,000. 

The property sold (to me) at the upset sale for $17,000 The Taxes and costs due to the county were about $5,000 leaving funds to payoff the $7,000 lein on the prior owner. 

My question is will the excess funds go towards paying off the Commonweath lein? or will those funds go to the prior owner and I would still be responsible for paying off the lien. ? 

If I am still responsible for the lein any tips or advice on the ability to negotiate the 12 years interest they are probably going to want to charge on the lein? 

Thanks for any input

Ray

[David Krulac]

@Melissa Brown  The overage can apply to both Upset Sale and Judicial Sale is PA.  If there are excess funds after paying the local/school real estate tax bill, the remainder can go to:

Current real estate taxes

Current Muncipal liens for water/sewer or any other bill initiated by the municipality

State Liens, usually for outstanding state taxes, sometimes employee/employer taxes

PA State Inheritance Tax which applies to all deceased owners and starts at dollar one with no exemptions, unlike the Federal Estate Tax.  (Approximately 13 states have either state Inheritance Tax or state Estate Tax, so that would possibly apply in other states besides PA.)

Welfare Liens

Nursing home liens

Mechanics Liens

Mortgages in order of recording date, first mortgages before second or third mortgages

Judgements (once boought a property where there was alien because the owner got in a bar fight and was sucessfully sued for medical bills esulting in a judgemen.)

Federal Tax Liens (Special rrules apply to IRS liens)

The precedence of pay off is determined by state law, government first, then the rest by date recorded.

Then is anything else is left over it goes to the former owner.

On one of our purchases there was a big Nursing Home lien that the Tax Claim Bureau was not aware of.  We got the documentation for it and gave it to the TC Bureau so that it waould be paid out of the proceeeds and not have to be paid by us as the new owner of the property.(this was Upset Sale where all liens transfre to the new owner.)

I am not an attorney, nor an accountant, nor a CFP, nor a doctors and am not giving legal, accounting, financial or medical advice.

David Krulac

Bigger Pockets Podcast #82