The answer is yes. In order to prevent your property from being sold at tax sale, the bank will pay your property taxes if you fail to. Tax sale wipes out mortgages – the winning bidder gets a free and clear deed – so if the bank didn’t pay them, they’d lose their interest in the property. This is why mortgages usually include the taxes in with the monthly payments. The mortgage company takes care of the taxes, and then you pay the mortgage company. If you stop making payments, they don’t have to worry that you’ve also stopped making tax payments… because they’re the ones paying them.
Your mortgage company may work with you to get the taxes paid off, and they may not. Depending on your financial situation, they may foreclose. It’s best to speak to someone at your mortgage company – don’t take anything you read online about this topic as fact. There is a lot of variation in the way different mortgage companies operate.
If you’re an investor, the above information may have piqued your interest – because what you learned from the above is that properties with mortgages generally don’t make it through tax sale, meaning most tax sale properties are free and clear. You could bid on them at tax sale… but you’ll find you get much better deals directly from owners than you will bidding against other bidders.
The key is waiting until a specific point in the process: the end of the redemption period.
By the end of the redemption period, you can be almost 100% certain that the property has no mortgage, and that the owner is not planning on paying off the taxes. In fact, there’s a little surprise in store for you when you contact these owners: most don’t care about the property, and would love to see the deed signed out of their name as soon as possible. These are often people who never wanted the property in the first place – like heirs.
If you play your cards right, you can often pick up these properties for as little as a few hundred dollars. Offer to pay the owner for their time in signing the deed (which they’ve decided is worthless)over to you, just so you can see what you can do with the property. You’ll receive an overwhelmingly positive response. Then, you just pay off the taxes and the property is yours – or sell quickly and let the buyer deal with the taxes.