Sell when owe taxes? - Posted by Nathan(oh)

Posted by John on July 09, 2001 at 17:09:16:

Yeah Ed, What Stacy said. I would also try and get the deed. Great info on the back tax tip. Thank you.


Sell when owe taxes? - Posted by Nathan(oh)

Posted by Nathan(oh) on July 08, 2001 at 22:39:02:

I am dealing with a seller who has a mortgage for 68k remaining on a prop. that would sell for 90-95k. 2 problems:

  1. Owe 800 worth of back payments.

  2. Owe about 3k in taxes.

I have no problem paying the mortgage to bring current, but do I have to pay the taxes before the house sells or can we use the equity to pay off the taxes after sale? Any help would be much appreciated. Thanks.

Re: Little know SECRET - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on July 09, 2001 at 10:43:17:

Did you know that you can assume the liability for the back taxes. In this case about 3K, be sure that you get a price reduction for doing that (like perhaps 4K). You can go to the local tax collector and pay just the oldest half year billing and the penalty for that billing. That will stop any action by the tax collector.

You can as someone else mentioned set up a payment plan for the back taxes. Generally they will work with any kind of plan that causes the balance to decline on a continuing basis. It helps to get face to face with the tax collector, who in my county is named Larry.

If you have the cash to bring the back payments current you will need to do this, so that the lender will not forclose. Now the obligation for the back taxes, as well as the money for the back payments; could be secured by a note and mortgage from the current owner. In other words you take over the obligation for his back taxes of 3K and he now owes you 3k so he signs a note for 3k, plus the amount for the back payments; payable to you. You record this note and mortgage. You then become a jounior lender. You as a jounior lender bring the payments on the first mortgage (your new mortgage is in second position) current to make the seniour lender happy.

At this point or some time down the road the seller can give you the deed (in leu of forclosure). Most likely there will be no complaint from the seniour lender about the payments being brought current, by the jounior lender (you).

Re: Sell when owe taxes? - Posted by SueC

Posted by SueC on July 09, 2001 at 09:41:25:

You might try having the seller set up a payment plan for the back taxes. It would depend on the local rules how this works, but in my county for example, if the owner is 2.5 years past due the house goes up for tax sale, unless the owner makes a payment plan. You might add the monthly payment onto your “costs” side of the equation at least to keep it out of the sheriff’s hands, if you’re close to a tax sale anyway.

Re: Sell when owe taxes? - Posted by JT - IN

Posted by JT - IN on July 08, 2001 at 22:59:01:


Sounds like you are describing a subject-to deal, where you will catch-up the back payment s, that the seller owes and keep their mortgage in place.

In that case, this is not a problem to pay the taxes out of the proceeds of a subsequent sale and closing.
That is assuming, that, this property is not in foreclosure for back taxes, and about to be sold by the Sheriff. Doubtful, with this amount of taxes owed, on a $ 90K house, in Ohio.

If you are selling retail, with conv financing, then equity proceeds can be used to pay back property taxes. If you are selling on L/O, then you can pay taxes out of Option deposit, or at some time later on, just so it is before there is any legal filing against owner of record, for foreclosure for back taxes.

Be sure to have a title search done, to avoid any liens against the proeprty or it’s current owner, that have been missed. This is prevalent with folks that are in financial troubles. Be careful, but it seems that for little back pymt, and tax bill, you can pick-up some NICE EQUITY here. Congrats and Good Luck!


Re: Little know SECRET - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 09, 2001 at 12:46:36:

Ed, I like the strategy you outlined. It could be used for any pre-foreclosure, not just those involving back-taxes. That is, if the numbers work.

One thing that I don’t understand, though, is your last paragraph. Where is the owner’s incentive to deed you the property as a junior lender? You’ve caught-up his taxes and mortgage, so he could just say “thanks” and continue-on. If he gets in trouble again, down the road, you may have to foreclose to get your investment back (and/or the property). The only way I’d get involved in this would be if I KNEW the seller was going to deed me the property.

Shouldn’t the owner sign over the deed (which you can record after becoming the second lender) before you invest your money in his property?

Anyway, I like your idea.