Due Diligence Question On buying a 1st NP Note With A Tax Lien

[Bret N.]

The note I am looking to buy has back taxes that were "Sold To The State" in 2010. Even with that amount that was sold to the state the deal would still be worth it.  How does this play out when you buy a 1st with liens on it?     Thanks for your insight!

[Mike Hartzog]

It's not a problem.  The liens can be redeemed, but you do not necessarily need to do it right away.  It depends on your workout strategy. For example, if you are able to get the borrower paying again, perhaps with a  loan mod, you could potentially make payment of the tax liens by the borrower a condition for the mod.  Or you could redeem the liens and add them to the principal balance in the mod.  If you end up acquiring the property via deed in lieu or foreclosure, you will want to redeem them.  One thing I always check on when there are significant delinquent taxes due is the date when the property could potentially go to tax deed sale.  The county tax office can provide that sort of information.  I make this call as part of due diligence prior to purchase.