Real Estate Taxes and Liens Flashcards

Liens Overview

• Voluntary Specific Lien: A mortgage lien is a voluntary, specific lien created by a borrower naming specific property to secure the lender.
• Involuntary Statutory Lien: A real estate tax lien is specific, involuntary, and statutory, created without property owner permission and imposed by law.
• General Voluntary Lien: Another example of a voluntary lien is the mortgage lien, which reflects intentional action by the property owner.

Priority of Liens

• Definition: Priority of liens determines the order of claims against a property that will be paid off during a sale.
• Order of Payment: Generally follows "first come, first served" principle, with exceptions for statutory liens such as taxes and assessments.

Real Property Tax

• Target Group: Real property taxes specifically target homeowners, known as ad valorem taxes, based on the value of real estate.

Mechanic's Lien

• Eligibility: Mechanic's liens can be sought by contractors, subcontractors, and surveyors, but not by real estate professionals not owed commissions.

Foreclosure Sale Priority

• Highest Priority Lien: Unpaid real estate taxes take precedence in foreclosure sales, being a statutory lien superior to other contractual liens like mortgages.

Debtor-Creditor Relationship

• Commonality: Both mortgage liens and judgment liens establish a debtor-creditor relationship, despite differing in nature and origin.

Tax Calculation

• Market Value Assessment: For a property valued at $160,000, assessed at 75% (i.e., $120,000), with a county tax rate of 40 mills, the resulting tax bill is $4,800.
• Mill Rate Explanation: A mill represents 1/1000 of a dollar; thus, a 40-mill rate implies a tax of $0.040 for every dollar assessed.