Below is an article from the News Section of Mar (Michigan Association of Realtors®) concerning a recent issue that has come up in Michigan real estate; as if we needed yet another issue.
New Issues Surrounding State Tax Liens
9/4/2012 From the Michigan Association of Realtors Web site -
REALTORS® in Ingham County have recently had closings fail at the last minute due to the discovery of numerous state tax liens against the property they are trying to close. The state tax liens are filed against the owner or a former owner of the property who received a deed for the property as a result of a foreclosure by advertisement. The claim for unpaid taxes appear to arise from a failure of a purchaser who did not reside on the property (the “Non-Resident Owner”) to pay additional property taxes as a result of the removal of the principal residence exemption (“PRE”) after December 31 of the year title transferred to the Non-Resident Owner. The Non-Resident Owners to date that have been brought to the attention of MAR are HUD, Federal Home Loan Mortgage Corporation and Wells Fargo Bank. It is fair to assume the same situation exists for other banks, Fannie Mae and Freddie Mac.
The state tax liens have been filed with the Ingham County Register of Deeds. The Michigan Department of Treasury contends that the filing of a state tax lien with the Ingham County Register of Deeds covers all properties owned by a Non-Resident Owner anywhere in the State of Michigan. In other words, if the Federal Home Loan Mortgage Corporation has a state tax lien filed against it in Ingham County, it is claimed that this state tax lien attaches to all properties owned by the Federal Home Loan Mortgage Corporation throughout Michigan. It should also be noted that the state tax liens are cumulative. For example, if the Federal Home Loan Mortgage Corporation has state tax liens against it totaling $150,000 based on taxes owed on a number of different properties, the entire $150,000 will attach to every property owned by the Federal Home Loan Mortgage Corporation in Michigan. This could result in a property under contract for $12,000 having tax liens against it totaling $150,000.
It is our understanding that Non-Resident Owners such as HUD are currently working with the Michigan Department of Treasury to try and resolve this situation. Further, MAR will continue working with Treasury to address this issue. In the meantime, if REALTORS® are listing properties or representing buyers who are interested in purchasing properties that are currently owned or were owned at one time by a Non-Resident Owner, they should check with a title company to make certain that there are no state tax liens on the property. If there are state tax liens on the property, as a practical matter, it is likely that the property cannot be sold until this issue is resolved with Treasury. Keep in mind that this particular problem with state tax liens arises out of residential properties that were previously owner-occupied and then acquired by a Non-Resident Owner, such as HUD, typically through foreclosure. The liens may come up in transactions involving both residential and commercial real property.
There is also a MAR video http://www.youtube.com/watch?v=O__ye32tmms&feature=youtu.be
So, Michigan is once again in the Avant-garde of real estate issues, with the State Treasurer wreaking havoc on closings in the search for a few more dollars for the depleted Treasury. This may also be another unique to Michigan issue, since not all state may have a homestead tax break, which gives owner-occupants a break on property taxes (as opposed to investors). I’ve often wondered why the banks and the quasi-governmental and government entities could get away with things that normal people would be held accountable for; now I guess that’s what the Treasurer is try to do – hold them accountable. It remains to be seen whether the State’s argument that the banks/agencies are in fact the owners after the Sheriff’s sale will hold up in court.
This will likely be resolved soon, as the MERS issue was; but, in the meantime, this is yet another thing to be checked out by the Realtors involved in a sale – has the bank/entity paid the extra non-homestead tax?
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