Can paying back property taxes on a bank-owned property get ownership?

Question from Mike, Can paying back property taxes on a bank-owned property get ownership?

Answer from AI:

How Back Property Taxes and Bank‑Owned (REO) Properties Interact

When a homeowner falls behind on property taxes, the taxing authority can place a lien on the land and, after a statutory period, sell the tax lien or the property itself. If the property is later foreclosed and purchased by a bank, it becomes a real‑estate‑owned (REO) property. At that point the bank holds legal title, but the tax lien (or any unpaid taxes) may still be attached until the bank clears them.

Who is Responsible for Paying the Taxes?

• Bank as Owner – Once the bank has taken title, it is generally responsible for paying any outstanding taxes to avoid losing the property again.
• Third‑Party Payer – A private individual can offer to pay the back taxes, but without a prior agreement that payment does not automatically create an ownership interest. The bank can simply reimburse the payer or reject the payment.

Situations Where Paying the Taxes Could Lead to an Ownership Interest

1. State Tax‑Sale Laws – Some states (e.g., Florida, Texas) allow a person who pays a tax lien or tax deed to acquire a statutory right to redeem the property or to become the owner after a redemption period if the original owner does not pay. These statutes apply to tax‑sale purchasers, not to REO owners, unless the bank’s title is still subject to the lien.
2. Negotiated Agreement with the Bank – The most realistic path is to negotiate a contract with the bank. The bank might agree to grant a fractional interest, a partnership, or a purchase‑option in exchange for the tax payment. Such an agreement must be in writing, recorded, and comply with state real‑property statutes.
3. Purchasing a Tax Lien or Tax Deed – In jurisdictions that sell tax liens or deeds, an investor can buy the lien, pay the taxes, and, if the delinquent owner fails to redeem, obtain a deed. This route bypasses the bank entirely, but it only works if the tax authority still holds the lien, not after the bank has cleared title.

Practical Steps to Consider

• Research State Law – Tax‑sale procedures differ widely. Look up the statutes for the specific state (e.g., “Florida Statutes § 197.011” for tax deed sales).
• Check the County’s Tax Records – Verify whether the tax lien is still outstanding on the REO parcel. County assessor or tax collector websites often provide this information.
• Contact the Bank – Ask the REO department if they are willing to discuss a joint‑ownership or profit‑sharing arrangement in exchange for clearing the taxes.
• Draft a Formal Agreement – If the bank agrees, have an attorney prepare a deed, partnership agreement, or option contract that clearly outlines each party’s rights and obligations.

Risks and Caveats

• No Automatic Ownership – Simply paying the taxes does not confer any legal interest unless a statutory provision or a contract says otherwise.
• Potential for Fraud – Be wary of schemes that promise ownership for a tax payment without a recorded agreement; they can be scams.
• Financial Exposure – Paying back taxes may involve interest, penalties, and the risk that the property’s value is less than the total outlay.

When to Seek Professional Help

Because the interaction of tax‑sale law, foreclosure law, and contract law is highly state‑specific, consult a licensed real‑estate attorney before making any payment or signing an agreement. An attorney can verify the status of the lien, ensure the agreement is enforceable, and protect your interests.

For further reading, see the Internal Revenue Service’s guidance on property taxes and a typical state’s tax‑sale statutes, such as the Florida Statutes on Tax Deeds.