Will the bank show up to the auction if they stopped paying taxes?

Question

If the bank stopped paying property taxes, how likely are they to skip the foreclosure auction?

The property has been vacant for two years.  The electric has been off so the sump pump would not be functioning.  The basement's probably been flooded on and off for that entire two years.  You can actually see from the outside that the foundation looks damp all the time.  The mold must be terrible and I expect that the furnace is completely rusted out.

There's about two inches of moss on the roof and the porch.

Considering that they are going to need to pay 5k in property taxes, get a quiet title, pay a REO realtor, and get the place up to code for showings or winterize, is it possible that they won't show up?

I'm partial to the house because I grew up in the neighborhood.  For anyone else, it's an expensive and gross headache of a house.  It's not worth that much fixed up (210k at the most) and I estimate it needs at least 80-100k of work.

The bank mortgage balance is 150k.

Adam Walter · Answer

My experience in Ohio (it may be different in your area) is that if the bank brings the forclosure, then they 99% certian to bid on it unless the amount owed is lower than the opening bid.  What their top dollar is depends on a lot of factors and whether or not the bank pays the back taxes before the sale or after doesn't really matter.  I feel the main reason the bank pays back taxes is to protect themselves of a tax foreclosure happening and they loose their security for the loan.

If it's a tax foreclosure, to @Bruce Lynn point, the bank will normally pay the taxes before the sale.  Very rarely will a bank bid on a tax foreclosure, if it happens it's usually small local banks who would rather have the county do the foreclosure instead of them.

This might be interesting:  I purchased a property subject to a bank's defaulted note and mortgage several years ago.  The previous owner filed bankruptcy and gave up the property in the bankruptcy.  The bank never filed foreclosure and the previous owner sold it to me.  I am purposely not paying the real estate taxes with the hope that the bank will not see the eventual foreclosure and I can bid on it at the sale to get the lien removed.  Fingers crossed.

Ned Carey · Answer

@Kristine Ann is this a tax lien auction or a tax deed auction? In Maryland they sell tax liens. Generally the bank doesn't bother at the tax lien auction. They will normally pay it off during the redemption period.

Sometimes banks that are doing a foreclosure mortgage just figure the taxes will get paid when the property changes hand due to their foreclosure. Sometimes they get caught becuase the tax sale foreclosure goes through before the mortgage foreclousre. We have had this happen a number of times.

Many banks are so large that one side of the bank doesn't know what the other side knows or is doing. The notice of a tax sale may not get to the right person to pay it off.

Banks often stop paying the taxes when the escrow money for taxes gets used up because the owner stopped paying the mortgage. This is not a good move on the banks part, but they tend to delay any costs as long as they can.  We have taken a lot of prperties from banks theat were asleep at the wheel. But this generally doens't happen on nice houses. THe house you describe is one where it could easily happen.

Bruce Lynn · Answer

In my area, they normally pay at the last minute, even the morning of the sale.

Never seen a nice house with a big mortgage actually go thru with tax sale.

Could happen.

Who is the lender?

John Underwood · Answer

I got a Bank owned property before from a tax sale. The bank foreclosed on the owners put on a lockbox and then did not pay the property taxes.

It was a 3 bedroom house. Still have it today and it still has the tax deed.

Martin M. · Answer

@Kristine Ann

If I'm understanding what you're saying correctly...  then this is quite simple.

When is the tax sale date for the delinquent property taxes? If you're not sure call the county treasurer and get the date.

Next question is... when is the foreclosure sale? If foreclosure sale date is before property tax sale date, then foreclosing party may just let foreclosure auction buyer pay the delinquent taxes.

Kristine Ann · Answer

That makes sense @Martin M.The mortgage foreclosure auction is in June.  The tax auction isn't until October in this county.

Kristine Ann · Answer

It's actually a mortgage foreclosure @Ned Carey.  I've never bid on an foreclosure auction before and I was surprised the bank would risk losing the property to tax default....but maybe they just want rid of it either way.  I'll show up to the mortgage foreclosure auction either way and see if they show and what they bid.

My theory about what might have happened was that the foreclosure wasn't going through the courts because the guy disappeared off the face of earth and hadn't been served the papers after several attempts.  The bank stopped paying the taxes because it's a loss either way.  But finally the court approved the foreclosure and now it's going through.

Kristine Ann · Answer

Thanks @Adam Walter and @Bruce Lynn for your responses.

I just really hate this process:  2-3 years to foreclosure, then dormant REO, then investor rehab fail, then 2-3 years of tax default, then tax default auction. By the time the property reaches the tax default auction, it is completely unsalvageable.  It seems like every working class neighborhood has one of these disgusting eyesores. I wish I could swoop down and rescue this property from this inevitable downward spiral.

Kristine Ann · Answer

Freedom, I think.  They are foreclosing on the property but have delinquent taxes. I definitely wouldn't call it a "nice house."  I know the houses in the area very well and I'm sure it has a flooded basement and it's been flooded for a while. And the roof looks spongy.

Is it normal for the lender to stop paying the property tax? They paid the most recent but last years is unpaid. It's not worth anyone's time for 100k or 150k, that's for sure. It saddens me because the neighborhood is going to have to watch this house degrade further over the next couple years if it sits in REO limbo.

Will the bank show up to the auction if they stopped paying taxes?

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