Responsibility Before Deed in Lieu Approval
When you're asking the bank to approve a deed in lieu of foreclosure, you are still responsible for any property taxes owed at that time. In fact, it's unlikely that a bank will approve a deed in lieu of foreclosure if there are outstanding property taxes owed.
Tax Responsibility at Deed Transfer
If the bank approves an offer for a deed in lieu of foreclosure, the homeowner will be responsible for paying a state deed tax. The amount of this tax is dependent on the difference between the home's fair market value and the balance owed on the mortgage, as well as any liens that were previously on the property.
Responsibility After Deed in Lieu
After a deed in lieu has been approved and you've signed over the deed of your home to the lender, you no longer have responsibility to pay property taxes on the home. That's because the home now belongs fully to the bank. As such, it's responsible for any property taxes incurred from the date of the deed in lieu forward.
Word of Caution
In a time when foreclosures are common and banks are dealing with record number of deed in lieu of foreclosure requests, there may be a delay between the time you turn over the deed of your home to the bank and the time the bank records the change of ownership with your state. This may result in your state continuing to charge you property taxes on a home you technically no longer owe. Thus, it's a good idea to check, shortly after handing over the deed of your home to the bank, that you're no longer listed as the home's owner in your state's property records.
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