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re: Somebody fully explain how buying property with delinquent taxes works
Posted on 4/12/17 at 12:50 pm to Sneaky__Sally
Posted on 4/12/17 at 12:50 pm to Sneaky__Sally
quote:
Usually I see it stated as a "1% interest in the property" when it goes to tax sale. So who would foreclose, do you essentially assume the position of a partial lender on the property when you buy it at tax sale?
I'm not really familiar with jurisdictions that allow partial ownership %s. So I can't really answer that. In the jurisdictions which I am familiar, you are transferred the super-priority lien from the tax authority which supersedes even that of a first mortgage (which is why mortgage companies will redeem liens - to protect their collateral) and you would be sole owner of a property if you take it all the way through the foreclosure process.
1
Posted on 4/12/17 at 12:50 pm to StinkBait72
quote:
Once you buy the tax lien you are "required" to pay the taxes for the next few years. If you do not they will just auction it off again and restart the process. If you do pay it keeps other investors from acquiring those same "rights" you already have.
Very interesting, thanks for the answer.
Posted on 4/12/17 at 12:52 pm to GeauxColonels
quote:
you are transferred the super-priority lien from the tax authority which supersedes even that of a first mortgage (which is why mortgage companies will redeem liens - to protect their collateral)
ok, i didn't realized it supersedes the first mortgage. I do valuation and we always have to call the bank if the taxes aren't paid so they can go and redeem them.
Posted on 4/12/17 at 12:53 pm to StinkBait72
quote:
What if multiple people have acquired the "rights" for the same property in different years?
quote:
Once you buy the tax lien you are "required" to pay the taxes for the next few years. If you do not they will just auction it off again and restart the process. If you do pay it keeps other investors from acquiring those same "rights" you already have.
Well, in most states you aren't technically required to by delinquent tax liens in subsequent years. However, if you don't then the newer lien technically trumps the lien you assumed when you purchased the older lien. So it only makes sense to ensure you acquire all subsequent liens on a property....especially if you're looking to take it to foreclosure.
But, keep in mind, that the vast majority of tax lien purchasers are looking for a redemption on the lien to earn the interest / penalty on their investment. Rarely do they actually want to spend the time and money to through a full foreclosure process.
Posted on 4/12/17 at 12:54 pm to StinkBait72
quote:
Once you buy the tax lien you are "required" to pay the taxes for the next few years. If you do not they will just auction it off again and restart the process. If you do pay it keeps other investors from acquiring those same "rights" you already have.
Have to pay the taxes up front or when they come due?
Because it sucks to pay up front, but you will be paying anyway.
Unless I am misinterpreting what you are saying.
Posted on 4/12/17 at 12:55 pm to fightin tigers
quote:
Have to pay the taxes up front or when they come due?
Because it sucks to pay up front, but you will be paying anyway.
Unless I am misinterpreting what you are saying.
The property owner is always the party responsible for paying taxes. A lien is only created when they fail to do so.
Posted on 4/12/17 at 12:58 pm to GeauxColonels
quote:
Well, in most states you aren't technically required to by delinquent tax liens in subsequent years. However, if you don't then the newer lien technically trumps the lien you assumed when you purchased the older lien. So it only makes sense to ensure you acquire all subsequent liens on a property....especially if you're looking to take it to foreclosure.
This is what I meant. They state you are "required", but they have nothing to hold against you if you decide to walk away.
I just deal with Louisiana Liens currently and chase the % returns (5% at the sale +1% every month). I do have a couple getting close to the redemption deadline though.
Posted on 4/12/17 at 12:59 pm to Bayouboogaloocrew
1. Prepare your anus for a good stretchin.
Posted on 4/12/17 at 12:59 pm to StinkBait72
Each state is different.
In Mississippi, you pay the delinquent taxes. The previous owner has two years to redeem the property. If they do, they have to pay 18% annual interest. If a bidding war breaks out, the winner gets only the tax owed plus interest (no overages). If it isn't redeemed, you can request a tax deed after two years.
The biggest risk is you buy a house that falls into disrepair. If they can't even afford the taxes they can't afford upkeep. So you could end up with something that needs more in repairs than it'll be worth when you're done.
I would assume that most aren't subject to a mortgage because the mortgage holder wouldn't let it get to that point. It's more common to pay that from an escrow account that's tacked on to your P&I payment.
In Mississippi, you pay the delinquent taxes. The previous owner has two years to redeem the property. If they do, they have to pay 18% annual interest. If a bidding war breaks out, the winner gets only the tax owed plus interest (no overages). If it isn't redeemed, you can request a tax deed after two years.
The biggest risk is you buy a house that falls into disrepair. If they can't even afford the taxes they can't afford upkeep. So you could end up with something that needs more in repairs than it'll be worth when you're done.
I would assume that most aren't subject to a mortgage because the mortgage holder wouldn't let it get to that point. It's more common to pay that from an escrow account that's tacked on to your P&I payment.
Posted on 4/12/17 at 1:00 pm to StinkBait72
quote:
I just deal with Louisiana Liens currently and chase the % returns (5% at the sale +1% every month). I do have a couple getting close to the redemption deadline though.
I know nothing about how the system works in Louisiana. I'm pretty well versed in FL as well as MD, DC, NJ, & IN.
Posted on 4/12/17 at 1:01 pm to Bayouboogaloocrew
You trying to buy my house baw?!?
Posted on 4/12/17 at 1:15 pm to GeauxColonels
quote:
The property owner is always the party responsible for paying taxes. A lien is only created when they fail to do so.
Um, obviously.
The way it stated was that paying the taxes for 3 years was some sort of problem.
Posted on 4/12/17 at 1:39 pm to Bayouboogaloocrew
I purchased a trash lot at tax sale in Hot Springs Village, a retirement community with some gorgeous golf courses. Cost me $368 in unpaid taxes. Held on to it for a year, paying the next year's taxes and the POA dues, which entitled me to all the perks of membership, including free golf. The original buyer did not come forward. As soon as a year passed, I was passed deed free and clear. I sold that for $7500 and purchased two more tax sale lots, costing about $2700 total, except one of them was a great lot on the 9th hole of the Coronado course. I did not expect to keep this, but the owner never came back and claimed it. I sold the other lot for about $8500.
I traded the golf course lot to a home developer for $36,000 in equity towards the purchase of a condo he had for sale that overlooked the 6th green of the Desota Course. Sold that about ten years ago and made about $70k on the sale after real estate fees. Not a bad return on my initial investment.
Good luck, but most experiences probably aren't as good as mine.
I traded the golf course lot to a home developer for $36,000 in equity towards the purchase of a condo he had for sale that overlooked the 6th green of the Desota Course. Sold that about ten years ago and made about $70k on the sale after real estate fees. Not a bad return on my initial investment.
Good luck, but most experiences probably aren't as good as mine.
Posted on 4/12/17 at 2:45 pm to Bayouboogaloocrew
Tax Sales are not the same as sheriff sales. Sheriff sale gets you Sheriffs deed. Here is where you (in my experience) go into a room with other bidders and you get raped bc they have all been doing this for 30 years and have more money than God.
A tax sale (in Caddo anyway) is typically set up as a percentage based bid system. Lets say I owe $100 taxes and don't pay. Bidding starts at $100 for 100%. The next bid will be $100 for 99% and so on. A lot of people just jump to 1%. They do this because they are betting that the property will be redeemed and are looking to profit the interest vs own 1% of some p.o.s.
If you win that basically gets you three more years of taxes on the property before you have a judge sign a monition to clear the title. This basically shuts down the redemption process and should clear any cloud on the title. Some of these people will redeem the property before the 3 year Redemption period is up, some will not. The property owner pays you the initial investment and 1% a month for every month until redeemed. I've heard you can have one monition filed for multiple properties, theoretically saving a few dollars) but I've yet to go through this stage. I've bought like 6 or 7 of these and am still testing the water. Thus far I think 2 have been redeemed, I let 2 go back and I'm waiting to file a monition on the remaining ones.
Of the ones that I "let go back"; one was "the site of prostitution, drug use, violence"... per the city and they were going to demolish it. The other was too far gone in an area that was also too far gone to ever be profitable. As far as I know you assume no liability for any property you are paying the taxes on until the redemption period passes and you have the title cleared.
I recommend driving by if its convenient. Google earth can only show you so much.
I've also seen property redeemed after the redemption period. I have no idea how this happened.
Check out civicsource.com
They explain this fairly well and are used through many areas of Louisiana
A tax sale (in Caddo anyway) is typically set up as a percentage based bid system. Lets say I owe $100 taxes and don't pay. Bidding starts at $100 for 100%. The next bid will be $100 for 99% and so on. A lot of people just jump to 1%. They do this because they are betting that the property will be redeemed and are looking to profit the interest vs own 1% of some p.o.s.
If you win that basically gets you three more years of taxes on the property before you have a judge sign a monition to clear the title. This basically shuts down the redemption process and should clear any cloud on the title. Some of these people will redeem the property before the 3 year Redemption period is up, some will not. The property owner pays you the initial investment and 1% a month for every month until redeemed. I've heard you can have one monition filed for multiple properties, theoretically saving a few dollars) but I've yet to go through this stage. I've bought like 6 or 7 of these and am still testing the water. Thus far I think 2 have been redeemed, I let 2 go back and I'm waiting to file a monition on the remaining ones.
Of the ones that I "let go back"; one was "the site of prostitution, drug use, violence"... per the city and they were going to demolish it. The other was too far gone in an area that was also too far gone to ever be profitable. As far as I know you assume no liability for any property you are paying the taxes on until the redemption period passes and you have the title cleared.
I recommend driving by if its convenient. Google earth can only show you so much.
I've also seen property redeemed after the redemption period. I have no idea how this happened.
Check out civicsource.com
They explain this fairly well and are used through many areas of Louisiana
This post was edited on 4/12/17 at 2:54 pm
Posted on 4/12/17 at 3:44 pm to StinkBait72
quote:
Once you buy the tax lien you are "required" to pay the taxes for the next few years.
Not in all states.
In Arizona this is correct; otherwise, the next purchaser buys out your interest.
In Florida, though, each lien sale is separate. If you file the paperwork to force the tax deed sale, at that point you have to buy out all other lienholders. At that point, if there are outstanding taxes still owed, then you would be required to pay them.
Posted on 4/12/17 at 3:50 pm to GeauxColonels
quote:
However, if you don't then the newer lien technically trumps the lien you assumed when you purchased the older lien.
Not in Florida.
Since you have to wait until April 1 of the second year after the lien was sold, the older lien has first right to force the tax deed sale.
I actually use that to my advantage: if there is a property with a lot of liens, but the older liens are owned by an investment fund, those funds aren't going to let their $$$ go bye-bye but they will wait until the last minute. So I buy the newer liens and when the older liens are about to expire, they will file for the tax deed sale and I get my investment plus interest.
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