Who must pay back taxes on short sale purchase? (CA) (Solano County)?
Trying to buy a short sale and recently learned that lots of taxes are owed on the property. My agent says not to worry, that we will get the prop free and clear and not to worry. I’m worried. How does this transaction work? Can the bank legally sell a plot of land with monies owed?
This is a general answer as I am not familiar with California law.
In a short sale, the bank holds the primary lien AFTER the property taxes. The title is still held by the seller – usually a party in or facing foreclosure.
The bank has to approve a repayment and closing of their mortgage at a lesser amount than is owed. That differential = short sale.
In other words, the bank does not own the property but they do have a right to have a say in the sale of the property because of their secured loan. If the property is sold without this approval, they can proceed with a foreclosure to recoup. And who would be holding title then?
A short sale offer should take the delinquent property taxes and any other secured liens into consideration. Which means that they need to be factored in BEFORE you make the offer to buy the property BELOW its mortgage amount.
The taxes are the responsibility of the Seller – owner of record – and they didn’t have the $$$ to pay the taxes in the first place. So your offer has to assume that you will be paying the back taxes and be made contingent to that amount being part of the short offer. I.e. deducted before the offer amount.
If the property is actually an REO owned by the bank, then your offer is not really for a short sale, just below the listed amount. In this case the offer should have included the tax delinquency payment by the bank. Which is good.
On a real short, the bank has no position from which to pay the taxes. Your offer isn’t to the lender, it is to the owner of record. Make sure that any purchase offer is reviewed by an attorney who specializes in real estate law. In lieu of that, use a realtor who knows short sales and is YOUR agent.
You should have a copy of the purchase offer already. How is it written? Read it carefully. Check with the County for other secured liens as well. Then you can decide whether to worry or not.