Episode 41: Researching Property Taxes

Most note investors check the mortgage but skip the one obligation that sits in front of every lien on the property. In this episode, we break down how to research property tax status before you close and why getting it wrong can cost you your secured position entirely.

🔍 What you'll learn:

✅ Why property taxes sit senior to every mortgage lien and what happens when they go unpaid long enough

✅ Why first lien investors must always check taxes — and when second lien investors need to pay closer attention than usual

✅ How to pull current tax status directly from the county website and why a dated screenshot belongs in every due diligence file

✅ The difference between tax lien states and tax deed states — and why the county process determines your timeline and your risk

✅ How delinquent taxes reduce your effective equity and why a discrepancy from what the seller represented should change your offer price

This program is for informational purposes only and should be independently verified before taking action.

Transcript

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Welcome to the show, where you'll learn how to invest in mortgage notes, the savvy real estate investor's secret weapon to create cash flow without tenants and property acquisitions for pennies on the dollar. My name is Robert Haitha, founder of Fix Notes, and my mission is to make note investing ethical, profitable, and accessible for you. In every episode, we're democratizing the industry to put these powerful Wall Street assets into the hands of Main Street investors like you. So without further ado, let's get into the show where you're in good hands with my AI clone. Let's go. This program is for informational purposes only and should be independently verified before taking action. Property taxes are a senior obligation. They sit in front of every mortgage lien, first or second, and if they go unpaid long enough, the government can ultimately take the deed to the property and wipe out your secured position entirely. That is not a theoretical risk. It happens. And the investors who get caught by it are almost always the ones who did not take the time to check the tax status before they bought the loan. For first position lien investors, property tax research is close to mandatory. As a first lien holder, taxes are the primary thing that can sit in front of you. There is no senior mortgage to worry about. Taxes are your senior obligation. If the borrower stops paying and a tax certificate gets sold, a clock starts ticking. If that certificate holder eventually applies for a tax deed sale and wins, your lien can be wiped. You would go from secured note investor to an unsecured creditor with very limited options. Understanding where a property sits in that process before you buy the loan is essential. For second position lien investors, property tax research is less urgent in most cases because the first lien in front of you is typically escrowing property taxes as a condition of the loan. The first lien holder is protecting their own position by keeping taxes current, which in turn protects yours. That said, you should not simply assume the first is current on taxes, especially when the first lien is itself non-performing. A delinquent first lien and delinquent taxes is a very different risk picture than a current first lien with delinquent taxes. The best place to start your property tax research is the county assessor or tax collector website for the county where the property is located. Most counties have searchable online records where you can look up a property by address and see the current tax balance, payment history, and whether any certificates or liens have been sold. It is free, it is fast, and it gives you current information straight from the source. When you find the tax status, take a screenshot and save it to your due diligence file with the date. Tax situations can change, and having a dated record of what you saw and when is good practice. When online records are limited or unavailable, a direct call to the county tax collector's office will usually get you the information you need. It takes a few minutes, but county staff are generally helpful, and for a deal where taxes are a material risk factor, it is worth the time. For investors working larger portfolios, there are vendor solutions that automate this process. The ownership and encumbrance report we discussed in an earlier episode often includes tax status as part of its output. CoreLogic offers a residential tax solutions product for bulk due diligence. First American has a product called Tax Source. Data Tree is another useful tool for individual loan research. These vendors save time when you are reviewing many loans at once, but for individual deals, it is often just as fast to check the county website yourself. When you find delinquent taxes, there are a few things to understand. First, the delinquent balance needs to be netted out of your equity calculation. If a property is worth $150,000 and there are $12,000 in unpaid taxes, your effective equity is reduced by that amount before you can even think about your lien position. Second, every county has a different process for moving from delinquency to tax certificate to tax deed. Some states are tax lien states where a certificate is sold to a third-party investor. Others are tax deed states where the county eventually sells the property outright. Redemption periods vary. Interest rates on delinquent balances vary. Knowing the rules in the specific state and county you are investing in matters, because those rules determine your timeline and your risk. Finally, if you are buying a loan with delinquent taxes and the seller represented them as current, that is a meaningful discrepancy that should affect your offer price. The delinquent balance changes the equity picture and the risk profile. Price accordingly. Next time, we are going to cover the resolution strategies available to note investors. The full menu of options from loan modification to foreclosure and everything in between. Thanks for sticking around to the end and thank you to my trusty Robot and the Fix Notes team for putting together another episode. If you want to learn more and hang out with the real, not AI version of me, join our free school community at school.com slash fixed notes. That's s k o l.com slash f i x no t e s. In the meantime, we will see you in the next episode.