Selling Property With Tax Liens

Published: 17th June 2015
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What if a 70-year old debtor owns their house outright, but there's a tax lien recorded on their property? For example, their home with land is worth about $300K, the judgment is for thirty thousand, and the prior state tax lien is for $40K.

This article is my opinion and is not, legal advice. I'm a judgment solutions expert, and not an attorney. If you ever need legal advice or a strategy to use, please contact an attorney.

One passive and cheap procedure is recording a real estate lien and just be patient. Getting repaid isn't guaranteed. For example, the debtor could apply for a reverse mortgage on their real estate, file for bankruptcy protection, or add somebody else as another owner of their real estate.

For every judgment collection effort involving a judgment debtor's property, the available equity is an important consideration. Creditors should consider buying a preliminary title report from a reliable title company or a web-based company such as Fidelity National Title or DocEdge.

A common judgment recovery procedure is recording a property lien, and paying your Sheriff to sell the debtor's real estate at an auction. The majority of judgment creditors should hire an attorney to guide them through the way property levies work where their judgment debtor's real estate is.

Sheriff real estate auctions cost a lot, and it might cause the judgment debtor to file for bankruptcy protection. Also, in some states, there's laws that provide additional exemptions to old judgment debtors. In spite of this, it remains a popular method of attempting to recover judgments. All previous tax liens need to be completely paid off. Mortgage companies make sure taxes are paid, to prevent tax lien investors from selling properties.

In theory, tax lien holders get first priority over most other liens, and don't need to take any action but wait patiently to get paid. Sometimes a tax lien owner can have their county foreclose and get the property clear and free of the majority of other liens including judgments, and benefit from the equity in the property. One reason investors buy tax liens is because some of them will have real estate having plenty of equity even after paying off all other creditors and the tax lien holder, along with the interest earned. As you would expect, most tax liens have real estate having little or no equity.

For every deed and lien, recording date priorities are often very important. There are 2 types of deeds, Grant Deeds and Deeds Of Trust. Grant Deeds (e.g., quit claims deeds) transfer property from one party or entity to another.

Deeds of Trust are loan and mortgage instruments which protect the interests of the lender. Deeds of Trust are most often linked to a loan agreement or a promissory note. A deed of trust is a security instrument, and a note is the document which forms the loan agreement identifying the real estate that a deed of trust secures.

Besides a Sheriff's levy auction of your debtor's property, what alternate strategies could work? In certain situations, it may be possible to work out some type of deal to get possession of the deed for their home, to satisfy your judgment with no out-of-pocket cost to them.

While being a long shot, one possible idea is to arrange some type of arrangement so you become the owner of your judgment debtor's property in exchange for letting them continue to live in that house the remainder of their life.

Creditors with notes secured with deeds of trust can probably sell their secured note for a discount to a buyer for cash up-front. With your $30K judgment, a $40K tax lien, and a three hundred thousand dollar property value, there's plenty of equity for a win-win deal. It all depends on how you structure and negotiate the deal with the judgment debtor, and then subsequently with the prior lien holders, and your new buyer.

Assuming you're able to work out a deal which is mutually acceptable, you'll get a note or a similar obligation which is transferable. At that point, you can probably interest an investor who will to pay you for it. Different than the majority of judgments where there are usually not any guaranteed available assets to pay them; senior-position notes secured by property with lots of of equity, can sometimes be sold for a substantial amount of cash upfront.


Mark D. Shapiro of: - The easiest and fastest free way to find the right expert to recover or buy your judgment.

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