Home Buying in 98103>Question Details

Jeanne0821, Home Buyer in 98103

What happens if the owner of the other side doesn't pay their taxes and the master Insurance?

Asked by Jeanne0821, 98103 Fri Aug 20, 2010

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I have not seen a buyer have to pay taxes in a short sale. They may ask a buyer to do that...but that does not mean it can't or will not close when the buyer says no. Usually on an IRS lien, it can be removed from the property. As to real estate and escrow taxes, the lienholder usually backs up their payoff requirements.

Suggesting the buyer should pay them is not the norm for the agent for the buyer, even though the agent for the seller may ask them to.
1 vote Thank Flag Link Fri Aug 20, 2010
At closing there are usually two (sometimes three) taxes that need to be paid by whomever is selling the property. If it is a short sale, then the lienholder approval has to be reduced to the amount leftover after taxes are paid. Those are real estate taxes and excise tax on the sale of the property. In addition it is not uncommon for an IRS lien to hit the property at the last minute in short sales.

I don't know how those are handled if you buy AT foreclosure at the courthouse steps. So if your are buying at the foreclosure, you may want to ask the Trustee Representative. My clients only buy pre-foreclosure or post-foreclosure and not at the courthouse steps.

Any unpaid insurance policy is usually cancelled, whether it is auto or home insurance or a Master Policy of an HOA...lack of payment normally = no insurance.
1 vote Thank Flag Link Fri Aug 20, 2010
The only way you can get caught holding the bag on this is if it is a short sale and the seller is facing bankruptcy. If they don't have the funds to close then you will be given the option of paying or not. If you choose not to you can walk away, and if you do, you can close. Be sure to do your research before hand and know what you are in for.
0 votes Thank Flag Link Fri Aug 20, 2010
The transaction won't close until the seller clears their debt to the day of closing when you rightfully become the new owner, assuming you are referring to the seller and their taxes and home owner's insurance
0 votes Thank Flag Link Fri Aug 20, 2010
Taxes are prorated as of the day of closing. I'm not sure what you mean by master insurance. If you mean home owner's insurance you will have a new policy as of closing. If the seller's property is uninsured at this time and something happens before closing then they will not be coverage.
0 votes Thank Flag Link Fri Aug 20, 2010
In the Metro DC area, the master insurance is part of the condo fees and the taxes are escrowed by the lender. If an owner doesn't pay their condo fees then the association will go after them and eventually file a lien on the property but that can take months. IF an owner is paying taxes themselves then it can take even longer for the local government to file a lien.

Eventually, delinquent condo fees and deliquent taxes will hurt every owner becasue when a property goes on the market, the assoiciation has to answer a questionaire concerning these issues. If the numbers are too high, prospective buyers won't be able to get a mortgage.
0 votes Thank Flag Link Fri Aug 20, 2010
I am not sure how it works in your area but here in New Jersey taxes become a lien on the propoerty that must be paid at the time of closing by somebody, usually the seller, but I have seen some situations, short sales being the most prominent, where the seller just doesn't have the money and teh buyer has to be sure all liens, not just tax liens, are satisfied in order to receive clear title to the property. The other liens can be negotiated, but tax liens are treated differently and my understanding is they must be paid, by somebody, at the time of closing.

I am not sure what happens when they don't pay the insurance,, let us all know, I am curious.
0 votes Thank Flag Link Fri Aug 20, 2010
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