Do mortgages carry over on tax deed sale properties

[c_bannard]

Hi I have a question about mortgages on tax sale properties.

I would like to know if when a tax sale property is purchased does it carry over the mortgage a previous owner may have had on the property or if the previous owner is still responsible for this debt with the title being clear?

The reason I'm asking this is because usually the mortgage is secured by the title, not the previous owner themselves.

If anyone knows or has a possible link to a site where there is some further information it would be greatly appreciated.

Thanks in advance,


Christian

[Frank]

You obviously haven't read any of the posted material on this site.  Please do so before you ask the next question as the answer has been provided at least 100 times.

Only crown liens survive a tax sale.  Any other mortgages or liens disappear.  Other encumberances on the property such as encroachments, rights of trespass, etc.. will also remain.

[atorrin]

Hopefully this question hasn't already been answered... I seem to recall a question being asked a while back about what actually happens to the mortgage on the property - I don't recall an answer. Does the bank just have to take a loss?

[c_bannard]

Thanks, I appreciate the info.

Is this also the same case within the USA, or does it only apply to Canada?

Forgive my stupidity but I would prefer to be informed before purchasing something that may have a bloody huge debt attached to it.

Would prefer to err to the side of caution than wind up with someone elses debt.

I'm from Australia so am VERY unfamilar with US and Canadian laws pertaining to property sales and taxes.

Regards,


Christian

You obviously haven't read any of the posted material on this site.  Please do so before you ask the next question as the answer has been provided at least 100 times.

Only crown liens survive a tax sale.  Any other mortgages or liens disappear.  Other encumberances on the property such as encroachments, rights of trespass, etc.. will also remain.

[Frank]

Does the bank just have to take a loss?

Yup.

[c_bannard]

In regards to this, are you sure this is correct? I got in contact with a title search company in the US and this was their response:


A tax deed purchase does not satisfy any open mortgages etc. If the current owner does not pay off the taxes within the allotted timeframe, the ownership gets transferred to the tax deed purchaser. You will inherit any open mortgages etc attached to the property. Subsequently, you should have a preliminary search to determine any open items to reduce your liability.

Who am I supposed to believe now?

For some reason, I wouldn't think that "the banks just have to take a loss". They're usually not into just giving away money.

Anyway, this is something I would really like to clarify.

If anyone has any legal eagle friends out there, could someone ask one of them?

I think this will really benefit everyone if we can clarify this once and for all.

I don't think any of us want to buy a "cheap" property only to owe a sh%tload of money on it already, especially if its attached to the title itself and not the owners name.

The reason I wanted to know about this in the first place is that usually mortgages are secured by the title of the property itself with personal guarantees by the owners, therefore the owner of the property is usually the bank, not the owner themselves (until they've paid out the mortgage).

It's that way in Australia at any rate. The bank holds the title to the property until the mortgage is repaid.

Regards,


Christian

Does the bank just have to take a loss?

Yup.

[Frank]

In regards to this, are you sure this is correct? I got in contact with a title search company in the US and this was their response:


A tax deed purchase does not satisfy any open mortgages etc. If the current owner does not pay off the taxes within the allotted timeframe, the ownership gets transferred to the tax deed purchaser. You will inherit any open mortgages etc attached to the property. Subsequently, you should have a preliminary search to determine any open items to reduce your liability.

Who am I supposed to believe now?

For some reason, I wouldn't think that "the banks just have to take a loss". They're usually not into just giving away money.

Anyway, this is something I would really like to clarify.

If anyone has any legal eagle friends out there, could someone ask one of them?

I think this will really benefit everyone if we can clarify this once and for all.

I don't think any of us want to buy a "cheap" property only to owe a sh%tload of money on it already, especially if its attached to the title itself and not the owners name.

The reason I wanted to know about this in the first place is that usually mortgages are secured by the title of the property itself with personal guarantees by the owners, therefore the owner of the property is usually the bank, not the owner themselves (until they've paid out the mortgage).

It's that way in Australia at any rate. The bank holds the title to the property until the mortgage is repaid.

Regards,


Christian

Does the bank just have to take a loss?

Yup.

I believe from your question that you/or we are confusing apples with oranges.  You are referring to Australia and the U.S..  Please realize that each of these jurisdictions have different laws - and in some cases even some of the provinces in Canada are unique.  We are referring to tax sale properties in Ontario, Canada only.  Now if you were to purchase a property through a Sherriff's auction in Ontario, Canada then that is similar to what you are referring to.  You might under that sale buy a property for a buck, but owe more than it is worth in mortgages since nothing disappears under that situation of sale. 

However, a true property tax sale in Ontario, Canada sees all but Crown liens disappear.  If you were to buy a property in Australia and found out afterward that was not applicabel, you wouldn't have a hope telling a judge that that's the way they do it in Ontario.

Sometimes we forget that we are on the world-wide-web, and we talk about these rules as though they are applicable universally - my apologies. 

Frank, from ONTARIO 

[c_bannard]

In regards to this, are you sure this is correct? I got in contact with a title search company in the US and this was their response:


A tax deed purchase does not satisfy any open mortgages etc. If the current owner does not pay off the taxes within the allotted timeframe, the ownership gets transferred to the tax deed purchaser. You will inherit any open mortgages etc attached to the property. Subsequently, you should have a preliminary search to determine any open items to reduce your liability.

Who am I supposed to believe now?

For some reason, I wouldn't think that "the banks just have to take a loss". They're usually not into just giving away money.

Anyway, this is something I would really like to clarify.

If anyone has any legal eagle friends out there, could someone ask one of them?

I think this will really benefit everyone if we can clarify this once and for all.

I don't think any of us want to buy a "cheap" property only to owe a sh%tload of money on it already, especially if its attached to the title itself and not the owners name.

The reason I wanted to know about this in the first place is that usually mortgages are secured by the title of the property itself with personal guarantees by the owners, therefore the owner of the property is usually the bank, not the owner themselves (until they've paid out the mortgage).

It's that way in Australia at any rate. The bank holds the title to the property until the mortgage is repaid.

Regards,


Christian

Does the bank just have to take a loss?

Yup.

I believe from your question that you/or we are confusing apples with oranges.  You are referring to Australia and the U.S..  Please realize that each of these jurisdictions have different laws - and in some cases even some of the provinces in Canada are unique.  We are referring to tax sale properties in Ontario, Canada only.  Now if you were to purchase a property through a Sherriff's auction in Ontario, Canada then that is similar to what you are referring to.  You might under that sale buy a property for a buck, but owe more than it is worth in mortgages since nothing disappears under that situation of sale. 

However, a true property tax sale in Ontario, Canada sees all but Crown liens disappear.  If you were to buy a property in Australia and found out afterward that was not applicabel, you wouldn't have a hope telling a judge that that's the way they do it in Ontario.

Sometimes we forget that we are on the world-wide-web, and we talk about these rules as though they are applicable universally - my apologies. 

Frank, from ONTARIO 

Hi Frank,

Thanks for the clarification.

I realise all the laws are different. I am currently searching the laws relating to tax sales in the USA and as you most correctly stated, the laws are different.

Even though most of the states and counties liens and tax deed sales provide gaining ownership of the property, the mortgages remain open and the purchaser of the tax deed or lien will "inherit" the mortgage if it hasn't be paid out.

That is just a bit of information about what I've researched so far, just in case anyone is ever interested in investing in non-Ontario tax deeds.

(Should probably move this thread to the USA section).

Anyway, thanks for the clarification.


Regards,


Christian

P.S.: Do you use MSN at all? I would like to have a chat to you sometime if you're not too busy.