Mortgage v. Property Tax Foreclosure

Posted September 24th, 2007 by Joe Kaiser

Tax foreclosures are COMPLETELY DIFFERENT from mortgage foreclosures.

Dear Rob,

I don’t know if you heard the news, but foreclosures in King County were up 64% in August, compared to the same month in 2006.

In Pierce County alone there were some 300 foreclosures filed last month.

Seems like it’s a good time to be in the foreclosure rescue business.


a big difference

Of course, we’re talking about “trustee’s sales,” not tax foreclosures, and there’s a difference.

I don’t think you get that.

In fact, I’m almost sure you don’t and that’s part of the problem. There’s a big difference between the two, Rob.


Huge Benefits

When you agree to buy someone’s home in a mortgage foreclosure situation (trustee’s sale here in Washington), you’re obligated to do certain things.

And #1 on the list?

Stop foreclosure.

That means bringing the loan current or paying it off outright. Clearing up the defaulted loan is just part of the deal and may be the reason the seller agreed to sell to you in the first place.

When you take care of his foreclosure as promised, the seller receives, at a minimum, the very real benefit of keeping “foreclosure” off his credit report.

There may be other benefits as well, and that’s a good thing.


Huge Problem

Of course, the exact opposite happens when you buy a home from someone in foreclosure and fail to cure his default. That causes the property to be foreclosed on, and you’ve damaged the seller in the process.

Not curing a defaulted loan and letting it go through foreclosure when you’ve promised it won’t creates a serious, long-term credit problem.

Worse, if it’s a mortgage foreclosure, it’s likely the seller now has a civil judgment against him and owes the lender a large amount of money for whatever shortfall is ultimately created.

And that’s not good.


benefits v. problems, we get it

It’s very simple . . .

In a mortgage foreclosure, stopping foreclosure provides benefits to the seller.

On the other hand, failing to stop foreclosure when you’ve promised to do so creates significant problems for him and is not something a legitimate investor would do.

That much we all get.


different animal

I’m not in the mortgage foreclosure business.

I work tax sales where 95% of the properties I see are free and clear (had there been a mortgage, the lender would have insisted the borrower pay the back taxes long ago).

Tax foreclosures are COMPLETELY DIFFERENT from mortgage foreclosures.

How?

In a tax foreclosure, paying the taxes and/or stopping foreclosure has ZERO IMPACT on the seller. Once he’s sold me his property, he’s 100% out of the picture.

Whatever I do with the property from that moment on does not affect him in any way, shape or form.

More to the point, NOT paying the delinquent property taxes has ZERO IMPACT on the seller.

None.


No such problems to solve

In a tax foreclosure, there are NO CREDIT ISSUES, whether taxes are paid or not.

Similarly, in a tax foreclosure, there are NO JUDGMENT ISSUES (as there are in a mortgage foreclosure).

And, if you’d simply check your office’s formal opinion database, you’ll see it was long ago decided that property taxes are not the personal obligation of the owner and NO LIABILITY ISSUES (monetary concerns) exist, either.

What does that all mean?

It means whatever I do with a property AFTER buying it from a seller in tax foreclosure IN NO WAY AFFECTS THE SELLER.


big diff

While your staffers likely had experience with mortgage foreclosures prior to investigating me, it’s clear they had little or no experience with property tax foreclosures. That explains their ignorance and why they mistakenly believe mortgage foreclosure rules apply to what I do.

They don’t.

And clearly, from your statements to the press, you believe stopping or not stopping a tax foreclosure is on par with stopping or not stopping a mortgage foreclosure.

It’s not.

Again, there is nothing remotely similar between mortgage and property tax foreclosures.

That’s how you can say things like . . .

They told property owners that they would solve their foreclosure problems . . . — Robert M. McKenna
March 14, 2007 Press Release

. . . and to this day have no idea how you got it all wrong.

Let me explain . . .

You’re asserting, Rob, that while we’ve purchased properties from sellers in tax foreclosure and paid them in full as agreed, their foreclosure problems were somehow not solved.

And that’s simply not true, not at all the way it works, and demonstrates yet again how little your office knows about the tax foreclosure arena.


Only One Problem

People in tax foreclosure don’t have “foreclosure problems” like damaged credit, civil judgments, and personal liabilities.

What problems do they have?

THEY ARE AT RISK OF LOSING THEIR PROPERTIES.

Understand, Rob, the loss of their property is the ONLY PROBLEM they face.

This “ONLY PROBLEM” matter is THE CRITICAL CONCEPT your office has demonstrated it does not comprehend.


Problem solved

Whenever we purchase a property from someone in tax foreclosure, WE HAVE SOLVED HIS FORECLOSURE PROBLEM.

He was at risk of losing his property and we put an end to that risk (and money in his pocket) when we bought it.

And now, HE HAS NO REMAINING “FORECLOSURE PROBLEMS.”

None.


borrower v. property

It’s very simple . . .

In a mortgage foreclosure, THE BORROWER IS IN FORECLOSURE and is personally impacted by the foreclosure in any number of ways, none of which are good.

But in a property tax foreclosure, THE PROPERTY IS IN FORECLOSURE and the owner is not personally impacted by the foreclosure in any way other than being at risk of losing his property.

See the difference?


No sense

Your office issued a press release that said . . .

According to the state‚Äôs complaint, the defendants told property owners they would pay off the delinquent taxes so that foreclosure could be avoided.. . . — March 14, 2007 Press Release

Do you now see how that makes absolutely no sense?

When someone in tax foreclosure is interested in solving his foreclosure problem, I attempt to do the one thing I can to assist him: buy his property.

Since his ONLY “problem” is the possible loss of his property, the ONLY solution I or anyone else can offer is to buy it. And once I do, unlike in a mortgage foreclosure, there are no remaining issues that can (or cannot) be addressed.

His foreclosure problem is 100% solved, whether I pay the delinquent taxes, or not, simply by having sold me his property. Heck, I could even let it continue on to the tax sale (sometimes, I do) and it would in no way be to the seller’s detriment.


Clueless in Seattle

Yet you allege I’ve failed to deliver on my promises?

And worse, you make ludicrous claims about me offering mortgage foreclosure solutions to people with property tax foreclosure problems?

Ridiculous.

Suggesting I did less than agreed or made an issue out of paying or not paying delinquent property taxes confirms your office has no idea how tax sales work.

None.

And sadly, that surprises no one here paying attention.

In the arena,

Joe Kaiser


2 Responses to: “Mortgage v. Property Tax Foreclosure”

  1. Brad Crouch responds:
    Posted: September 25th, 2007 at 5:26 pm

    Thanks Joe, for explaining the differences between tax foreclosures and mortgage foreclosures. You have explained it so that even a sixth grader can understand.

    I find myself wondering whether or not this works the same way in the majority of states . . . especially here in California. Looks like some research is now necessary.

    I’m sure you understand that your open letters to the Washington State Attorney General, is not only giving him an education (free education), but is also benefitting those of us who read your writings.

    The way I see it, now that Rob has gleaned the education, he no longer has any excuse for persuing the lawsuit against you.

    I think you have successfully pointed out (and continue to do so) just how bogus this lawsuit against you, really is. I really am surprised that this lawsuit hasn’t been dropped (with apologies) by now.

    Brad Crouch

  2. David Alexander responds:
    Posted: September 25th, 2007 at 9:07 pm

    Well Said, Joe….

    It’s amazing how attorneys just because they have a college education and initials by their name feel they know everything about everything…..

    The world is painted grey when they want it that way and black and white when it suits them… often on the same cause…

    I haven’t seen it yet, but heard that BUSH himself said the other night it was best to protect the Real Estate Investors as we go forward….

    Before we have an economic collapse….

    It’s strange because many seem to hate the idea of the real estate investor…. You know… ” they must be out stealing houses, and taking advantage of people” Instead of realizing that if were weren’t there to pick up the pieces then neighborhoods would truly fall apart.

    Hmm… in an arena of my own we sell banditsigns, directionals etc….

    And it amazes me that the ordinances are written and often enforced to keep you from putting out a few directionals to sell a house… or two

    Think about it… if their weren’t those us who went against the grain…. then houses would end up stacking up and never put back onto the market…. we clean up the messes that no one else will, in times when no one else could, Mostly because we got our degrees on the street….

    I know from my own experiences I’ve lost tens of thousands of dollars for the sake of education… but, somehow my profession is less admirable than that of others…

    They have no idea why we have to make the kinda of money we make, because when things go bad… they go bad… Risk/Reward….


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