Legal Question in Real Estate Law in California

Re: County Tax Sale Auction in California

The auction sale price IS the amount that the mortgage holder[s] get, nothing more. You get clean title.

Re: County Tax Sale Auction in California

First, let me start out by saying that there is no such thing as a "grand deed." A mortgage company usually takes a deed of trust as security for the borrower's promissory note, and I assume you are asking about what happens to a deed of trust. Another possibility is that you mean "grant deed," but lenders do not generally hold grant deeds. Grant deeds are used to convey ownership, not to secure loans. (A lender might also get a trustee's deed after foreclosure if it is the successful bidder at the foreclosure sale).

When there is a tax collector's sale for unpaid property taxes, the proceeds of sale are applied to the costs of sale and to pay-off of the delinquent taxes. Any surplus is held by the county tax collector, and former lienholders and former owners can submit claims against it within one year of the sale, based on their former liens or former ownership.

The successful buyer gets title free from most liens and claims, but the statutes do list eight kinds of lien (generally, governmental assessment-type liens) that will survive a tax sale.

The mortgage company's deed, note, lien or whatever is wiped out by the tax sale. The mortgage company can, however, apply to the county tax collector for payment from the tax sale surplus (if any).

The fact that the mortgage company has lost its collateral and has only a claim on possible excess proceeds does not, however, get the debtor (borrower) out of the woods. If the mortgage company held a note and deed of trust before the tax sale, it now holds an unescured note, and can sue the maker of the note for whatever is then due on the note, plus interest and maybe penalties.