Property bought at Foreclosure - How do I wipe out Tax Lien ?

Question

Hello BP community!

I'm looking at a foreclosure property in IL. Mortgage lender is the foreclosing party. Judgment of foreclosure already ordered by the court. Sheriff's Sale scheduled for May.

Separate to all of this, a tax lien certificate for the property was purchased by an investor last year. The homeowner redemption period for that ends in 2022.

Here's the million dollar question....

If I were to purchase the mortgage loan at the sheriff's sale - am I free and clear to pay off the senior lien, the property tax lien to wipe it out?

If the answer to that is yes, how much am I paying to wipe out the tax lien - is it just the outstanding balance that the homeowner owes to the tax lien investor, i.e. back taxes plus interest?

Thanks in advance!

Rob

Jason Duhn · Answer

Hello,

I'm an Indiana attorney, so ethically I can only speak as to Indiana.  But in Indiana, the foreclosing entity is required by Indiana statute to bring the property taxes current to even hold the Sheriff sale.  I don't know if Illinois has a similar requirement, but worth looking into.

Thanks,

Jason Duhn

Chris Seveney · Answer

@Chris Seveney

Also you are not purchasing the mortgage loan at a foreclosure sale you are purchasing the property.

Joe Martella · Answer

The tax lien should be the senior lien.  I know in NJ you have to pay the municipality.  There really isn't any negotiation on the taxes or interest/penalties owed.  If you don't bring the taxes current your risk losing your property in a tax lien foreclosure.

Vincent Incopero · Answer

@Robert E. anyone who has an interest in the property can redeem. An interested person would be an owner, lender, lienholder or legal heir (if the owners are deceased)

Robert E. · Answer

Thanks for responding guys. This is helping me to understand it better. I did do some more of my own research on the subject to get a better handle on it, and according to the IL 'Property Tax Code' state statute, under 'Redemption Procedures and Notice Requirements' I found:

"A right to redeem property from any sale under this Code shall exist in any owner or person interested in that property, other than an undisclosed beneficiary of an Illinois land trust, whether or not the interest in the property sold is recorded or filed. Any redemption shall be presumed to have been made by or on behalf of the owners and persons interested in the property and shall inure to the benefit of the persons having the legal or equitable title to the property redeemed, subject to the right of the person making the redemption to be reimbursed by the persons benefited."

So anyone can redeem the taxes looks like, provided that they have an 'interest' in the property. Will definitely need an attorney to clarify that part - what defines a person who has 'interest' in the property? From a lot of your responses, it sounds like that definitely includes me if I buy at the Sheriff's Sale. Thanks again!

Vincent Incopero · Answer

@Robert E. the tax lien you are referring to is separate and distinct from the mortgage that is being foreclosed on. Any amounts due and owing for sold taxes or erroneous exemptions would be a separate obligation than funds needed to purchase the property judicial sale. HIGHLY UNLIKELY that the foreclosing lender will pay these due to the redemption date.

I am an Illinois attorney and I have plenty of experience with these matters

Joe Martella · Answer

You would have to contact the local municipality:  County/township.  I cannot speak for your area, but in NJ the individual redeeming the lien pays the municipality and in turn the municipality sends me a check after I send in the tax lien certificate releasing the lien on the property.  The municipality then has the lien release recorded with the county clerk.

The best thing is that people don't really know who I am.  I make my investments, pay the subsequent taxes and wait for an e-mail from the municipality.  I don't deal with the people screaming at me or trying to negotiate down the penalties/interest (I am a softie when it comes to that stuff).  The only time they know I exist is if I am moving to foreclose.

Justin Polston · Answer

@Robert E. Assume the tax cert holder isn't one of those big outfits who don't pay attention to anything except the return and not expecting to get the house.

You could be dealing with a hyper local investor and you should keep a coin handy to see if you'll actually wind up with this place.

Good learning situation to discuss for sure though.

Robert E. · Answer

Thanks guys! Appreciate the responses, good info.

Just want to make sure I'm understanding correctly. Assume that I already bought the property at foreclosure. It sounds like even though the tax lien investor holds the property tax lien and not the county, the tax lien investor doesn't control the price that I'd need to pay to have the tax lien wiped from the property...  and the amount that I'd need to pay to have the lien removed, would essentially be limited to back taxes/interest/penalties. Do I have it correct?

and if so, who would I be writing the check to, the tax lien investor or the county?

Property bought at Foreclosure - How do I wipe out Tax Lien ?

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