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Nazareth, Pa., United States

Thursday, September 24, 2015

How Do Tax Sales Work?

Agent 99 has a report concerning the upset tax sale in Northampton County, which just occurred on Tuesday. I thought I'd share the story with you, but to do so, I need to explain tax sales. 

Most county governments conduct annual tax sales against property owners who have fallen behind on their real estate taxes. This can only happen if the property owner has allowed two years or more to elapse without paying his taxes. If the owner makes payment arrangements or has a hardship that excuses his nonpayment that year, the matter is removed from the sale list.

The first of these tax sales, as I've already mentioned, is what is known as the Upset Sale. The properties are sold to the highest bidder after the overdue taxes are deducted. But in addition to getting the property, the successful buyer gets all of its headaches. If there are three mortgages and twenty municipal liens, the winning bid just bought them, too 

That's why most properties aren't sold at the upset sale. After that, though, comes the real sale, which is called the Judicial Tax Sale. It is called that because a court order is obtained, authorizing the Tax Claim Bureau to sell the property free and clear of all liens, excepting the underlying taxes  All lien creditors who wish to protect their interest are notified. A property worth $1,000,001 with a $1 million mortgage will be sold free and clear of that mortgage.

I know several people who make a good living by buying and selling properties at tax sales. But I try to discourage friends who think they can get rich that way. Too many things can go wrong. Courts are very quick to invalidate sales if a property owner raises a legitimate issue about service, posting or advertisements. Also, a bank or other lien creditor who gets no notice will succeed if the sale is challenged. 

Agent 99 is a fellow title searcher and one of my spies. She was at Tuesday's upset sale, looking to see if there were any bargains. She saw none of those, but did encounter a property owner who got up and demanded a stay of the sale of her property. Her argument was that she would be able to pay her tax bill once she wins a lawsuit she has filed. 

I won't mention her name because I have no desire to embarrass her. As she droned on, one of the bidders told her, "Lady, nobody's gonna' buy your property because you got a mortgage." She shut up and nobody bid on her property. The room applauded her and she left. 

I hope she makes payment arrangements before the judicial sale. 

In most cases, people who lose their property at tax sale abandon them long before that fateful day. But there are people who sometimes lose their property because they get forgetful as they age. This actually happened to an aging attorney I know. He managed to convince himself that he had sought and obtained a stay, but nothing was filed. He lost his home, despite having a decent pension which he could have used to pay his bill. 

Before taking someone's home away at a judicial tax sale, it might be helpful to have a social worker visit the homeowner to serve notice of the sale and make a report, not just about service, but the condition of the property owner. 


Ken Kraft said...

I agree, if someone is old and makes this kind of mistake, maybe we could have a social worker visit and explain. It's only one little step that could possibly save someone from financial ruin.

Anonymous said...

It should be a law if the owner of said property is over a certain age...let's say 60+ that a social worker MUST meet with said person and report its findings back to the court before it can be sold.

Peter J.Cochran said...

Bernie ,Tax base needs revision, we should not have property tax tied to school districts ,because like in the Easton area they are about to extort us again with incompetency. In fact, today the paper say's Easton District is up for negotiations.I say they fail to produce any ivy league college kids . Today in the Wall Street Journal under 'Notable and Quotable' Educator Andre Agassi said-"As long as we're making education about adults and not the children,that's a problem. This means to say i my mind - The teacher's union comes first and they extort us . I say , and I'm not alone, that they should be forced to live in a budget and produce or find something else to do .Mr Agassi said ' there's no business in the world that could succeed if employees who worked for three years got a job for life.' MR. Furst is an example WHO PROBABLE HAD a deferment from the Vietnam War ,he brought suit against his own employer and received a job title that did not exist prior and was not in the 2012 budget . Is it not true.QUESTION MARK.-i SAY HORSE CRAP ---

Anonymous said...

So in an Upset sale you "inherit" the debt. Why would anyone buy anything at such an auction?

Anonymous said...

Some properties that are sold at upset sales either have no liens against them or the amount of the liens plus the unpaid taxes are still less than the value of the property. Anyone planning to buy a property at the upset sale really needs to do their research first. This year's upset sale had several investors bidding against each other on a property in Wilson Borough that had a $17,000 mortgage as well as over $37,000 in unpaid taxes. The home was worth much more than that, the assessed value (which is approximately half the value of the property) was $90,700. The bidding was quite lively, and the home sold for $80,000, which was quite a good bargain.
-Agent 99