Who is responsible for property taxes on a foreclosure

Who is responsible for property taxes on a foreclosure

When a home goes into foreclosure, financial chaos is about to ensue, particularly with regard to bills that go unpaid. It’s true that foreclosure eliminates mortgage debt from your credit report, but any existing foreclosure property tax bills (both past and present) remain. The taxes are due to the local level of government no matter what your ability to pay the mortgage may be, and so it remains an obligation. The precise party responsible for the taxes at any given time depends on the point where the home sits in the foreclosure process. Specifically, it depends on whether the home is still waiting to go to court or has been sold at auction to its next owner.

Who is Responsible for Property Taxes During Foreclosure?

The Borrower
If you are the one who took out the mortgage to buy the house and are now the one going through foreclosure at the hands of your lender, you are on the hook for property taxes until the auction takes place. As long as you are the owner of the home, you are the one responsible for the tax bills. Because you can’t afford to pay the mortgage, it’s likely that you haven’t paid the taxes either. In some cases, the lender puts the tax money down as a part of the foreclosure proceedings in order to safeguard the investment, so in that case, the home may not be delinquent on property taxes

Lender
The lender is not the responsible party of the taxes, but if the property is awaiting sale at auction, the lender might or might not front the taxes. The lender is ready to sell the property to get its money back, but if the government seizes the property for back taxes, the lender has no remedy. There are times when a property will go through an auction without anyone purchasing it; in that case, the lender is the new owner and then becomes responsibility for the taxes.

New Purchaser
If you buy a house at a foreclosure auction, you are now on the hook for foreclosure property taxes. Because you bought the home, the lender did not become the owner and there is no foreclosure property taxes owed.

Considerations
Foreclosure Property tax obligations follow the property rather than the person who owns the property. So if you want a foreclosure property in order to save money, you may have some back taxes on your hands to pay off. This is why performing a title check on a property is so crucial. If you buy a house that has existing tax obligations but fail to pay them, you can end up losing the house as well. Talk to a tax collector before bidding at a foreclosure so you do not receive a bill you weren’t expecting.

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