Tax lien properties w/ Mortgages

[Matthew T.]

I'm not sure if this question was answered but here it goes. If I go to a tax sale and bid on a tax lien property with a "mortgage" and win the auction, do I have to pay the monthly payment and/or be responsible for the remaining balance that is owed on the mortgage? I know that I would be responsible for any other liens on the property but I wasn't sure about mortgages.

Any help would be greatly appreciated. Thanks!

[Jerry K.]

Matthew Terry, What state are looking at buying tax liens? Each state (and some municipalities out East ) have their own rules for tax liens. Take the time and learn the rules for the area you're interested in getting liens.

For example, in some east coast states, you get a fixed rate of interest on the lien amount. The bidding starts at the taxes owed and can go higher. The amount above the taxes owed is called a "Premium". The premium effectively is reducing the amount of interest you're earning. Some states that have premiums don't pay any interest on the premium amount, only the taxes owed amount.

Some Premium bid states do allow some interest to be earned on the premium amount. You need to learn the rules for the state.

Also, out east, it's common that the lien holder is responsible for contacting the homeowner and getting them to pay the taxes and interest.

In the Midwest and West coast, it's common that the lien holder does NOT contact the owner at all. The county collects the taxes owed and interest and then forwards that on to the lien holder. The lien holder is actually forbidden to contact the owner.

Also in the Midwest and West, Southeast you often pay only the amount of taxes owed and bid down the rate of interest you'll accept on the lien.

For example in Florida, all liens start at 18%. You bid the lowest rate you would accept on the lien and the lowest bid wins. Many liens in Florida go for 0.25% interest. But Florida has a provision that allows the lien holder to earn at least 5% even if the winning bid was below 5% - you need to learn the rules.

Aimar Campbell is correct in that a lien holder does not have to pay mortgages or other liens. Some liens survive like IRS liens and Homeowner Association liens.

There is a lot to learn and specifically for the state in which you are buying liens.