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Yoyo, Home Buyer in

in a short sale transaction, who pays the soon upcoming unpaid property tax and defaulted tax owed from last

Asked by Yoyo, Wed Aug 20, 2008

year? what risks are there in short sales regarding liens and unpaid bills? what can we do to make sure there's no surprising bills after the house closed? are lenders responsible to clear the title before escrow? T.I.A

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Ultimately the mortgage company or teh bank approving the short sales pays off all liens. However in order to make the short sale work, trhe listing agent needs to include ALL fees, liens and expenses on teh net sheet when they submit a short sale. If the expenses are not on thier, they will not pay them and it will not close. The listing agent bears alot of responsibility to check back taxes, condo fees, 2nd or 3 rd mortgages, water bills, sewer bills or mechanics liens. If you are going to attempt to buy a short sale, find out how far along they are before jumping in. it could take 3-6 months and there are no guarantees they close. i have heard that 9 out of 10 dont close. Good luck
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Thu Aug 21, 2008
Typically you will have the banks payoff the back taxes and unpaid HOA dues. You can doublecheck with your escrow company if you are in the middle of your purchase.

Good luck...short sales can take a long time and often don't close.
0 votes Thank Flag Link Wed Aug 20, 2008

Property taxes are government liens, they are superior to ALL other liens, including deeds of trust (mortgage liens). If they go unpaid during a sale, they WILL be passed along to you - they go with the property, not the people. You need to make sure they are settled during your purchase, or count on paying them later.

Lenders know this, of course, so you could not actually finance this purchase without settling all unpaid taxes. No lien holder wants to be in a subordinate position to defaulted taxes. The county will demand payment on the fifth year and foreclose/auction the property if they are not paid.

You asked about risks regarding liens and I would suggest that you use an experienced title representative at the very least during your transaction. Lenders are NOT responsible for clearing title. That's your job...

Are you planning to finance this transaction? Lenders require title insurance and other processes that will benefit you. If you are not acquiring a loan, then use an experienced title/escrow agent and get title insurance. They will dig into county records and locate ALL claims to title. Your title policy, payable at closing, will protect you against anything they don't pick up.

Hope this helps... Let me know if I can clarify this in any way...
0 votes Thank Flag Link Wed Aug 20, 2008
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