Tax deed sale percentage buy down in Utah

15 Replies

I'm interested in bidding at a tax sale in Utah county. We are a tax deed state. The county recently changed the bidding process from a typical bid up auction to a percentage bid down auction. How they do it is they start the bidding at 100% of the property for the cost of the back taxes. To compete you bid smaller percentages like 95%, 90% ownership ect. The remaining percentage of the ownership is the original owner. Having two owners on the property is messy and complicated but I've researched what to do there. My question is do the liens on the property that normally disappear in a tax deed sale still disappear if the original owner retains some percentage of the property?

This doesn't make sense, but then sometimes government thinking doesn't make sense way too often.  So chances are I would not want to bid down in most cases.   Do you really want to become an undivided joint owner with someone who did not pay taxes?   What happens next year?  County auctions off the 5% you didn't buy to someone who pays 95% and now has undivided 95% ownership of 5% that you didn't get last year?   This is a good way to create a nightmare.

In some very unique situations I suppose you could speak to an attorney and see how you could partition off what you bought or force a sale.  You have to see what attorney fees would cost you and time and risk involved.  In probably too many cases, would be easier and less money to just buy the whole thing and not bid it down.

Utah county. It's new this year. I think the reason they did it was to make sure the previous owners would more directly benefit from the extras from the sale. Many of them didn't know they could collect the extra money that the auction brought in beyond the cost of the back taxes.

I'd ask a lawyer about it but the last one I asked didn't understand even the basics of this type of tax sale so I'm leery to ask one a more complicated question. When I ask the county assessor complicated questions about it he tells me to ask a lawyer.

I guess I'm hoping the complication will cut down on the competition.

I agree Bruce, best case scenario is 100% ownership. It would take 4 years of not paying taxes for it to go to the tax sale again. I don't want to share the ownership, I'd try to mediate for a sale and if that didn't work I'd file for a partition. I talked to a lawyer about that and he said it could be up to 30k and a year. I wouldn't go into it unless the profit potential is more than that.

I'm trying to figure out if the liens that normally get wiped out in a tax sale would still get wiped out if the original owner still owns some portion of the property.

William, I am curious about your encounters with tax sales in the Ogden area. Were they a bust or are there a few gems hidden among the 10 ft by 50 ft parcels?

Where are you getting this information?

Everything looks the same to me.  

Most of parcels that go to tax sale are garbage.  Gap rows, unbuildable vacant land, etc.  Anything that has actual value gets bid up well beyond the taxes owed.  Overages already go to other liens and back to the owner.  Most counties make provisions giving adjacent owners first option on unbuildable parcels.  The reason I mention all of this is because if the property is basically useless junk--which most of these are--there is no reason that someone would by it at 8 cents on the dollar instead of 11 (only to get a problem title at that).

I think your source is suspect or you're not understanding something.  By the way, you should be talking to the auditor or treasurer.  If you are being referred to an attorney, ask them what section of code has changed that an attorney can interpret.

As far as Weber county, I haven't seen much in the last few years.  There have been a few buildable lots (barely) that went for $5000-12000.   Not a terrific deal, but definitely below market.

One guy bid up a property to $36K.  It had a house on Google Earth, but had burnt to the ground a few years back and was now a bunch of weeds.  What's worse is that it lost its grandfathering and was below the minimum lot size, so there was a chance that he wouldn't even be able to build on it again.  Expensive garden.  

Finally, make sure you understand that title insurance underwriters don't like these.  You either have to hold them for a matter of years or quiet tile to get title insurance.  This means you can't sell them easily.

Hope that helps.

@Stewart VanValkenburg

I don't know about any changes in the last couple years in Utah county but I have attended several tax sales. Generally, along the Wasatch Front, the properties that go to auction have little value. It's usually unusable, vacant land just as @William Hochstedler mentioned above.  I have only purchased one parcel at a tax sale. It was a 15ft. wide x 40ft. deep rectangle and had value only because it was adjacent to my sister's home in Provo. The bidding started at about $450 to cover the delinquent taxes. The room was packed and there were others bidding on the same parcel, but I doubt they really knew what they were bidding on. I was the winning bid at about $900. They required cash or cashiers check for the full amount within a couple hours. My sister wanted the property simply because it gave her a bigger yard. 

I suppose a strategy for tax sales could be to purchase abandoned easements and land-locked parcels and then sell them to adjacent property owners. This gives you a very small buyers list and limits the upside. Still, if you buy cheap, there may be opportunities there. Sounds a little risky for just a few bucks.

Have fun out there!

I've been to the May sale before and it was interesting, but not something that I could make money off of.  As I'm looking at the county website, I'm not seeing any changes, but that doesn't mean there aren't any.  It is on May 18th and if you want to bid you need to pre register.

One thing I did like about it, is that the auctioneer does his best to help you.  He talks about exactly what you are bidding on.  I remember one bid where he said, "This is a triangle 25 ft long by 3.5 feet on the end and it is under the concrete on University Parkway.  The city has an  easement and if there are no bids, the property will revert to the city.  Bidding starts at $35."  One person bid and won it.  It was like he was pleading to let the city clean up these old properties that have no business not being owned by the state, city, or county but if the buyer isn't listening, it starts over again.

I do recommend you go for the learning experience.

@William Hochstedler

I got this from the FAQ link #9.

This is a new provision that wasn't around last year. The land lots still go at the typical bid up type auction. I've researched the quiet title stuff but thanks for the heads up. I am hesitant to go to a lawyer because since this is new this year none of them have experience in it. Also, I went to a lawyer before and he gave me and he gave me a weird answer. I checked it with the county assessor, who runs the tax sale, and found out his answer was a bunch of baloney. 

I stand corrected.  It looks like they're trying to simulate a tax lien in a state that doesn't sell tax liens.

59-2-1351.7 Partial interest tax sales.

(1) For purposes of this section:

(a) “Tax sale interest purchaser” means an owner of an undivided interest in a parcel of tax sale property that bid for and purchased the undivided interest:

(i) at a tax sale in accordance with Section 59-2-1351.1;

(ii) on or after July 1, 2007; and

(iii) if the undivided interest in the tax sale property equals 49% or less.

(b) “Tax sale property” means a parcel of real property that was sold in part as an undivided interest at a tax sale in accordance with Section 59-2-1351.1.

(2) If a parcel of tax sale property is sold, a tax sale interest purchaser may only receive from the sale of the tax sale property, an amount equal to the greater of:

(a) the amount the tax sale interest purchaser paid for the undivided interest in the tax sale property at the tax sale plus 12% interest; or

(b) the tax sale interest purchaser’s pro rata share of the sale price of the tax sale property based on the percentage of the undivided interest the tax sale interest purchaser holds in the tax sale property.

(3) A tax sale interest purchaser may not object to the sale of the tax sale property if the tax sale interest purchaser receives an amount in accordance with Subsection (2).

@Bruce Lynn  I agree with your first assessment.  Nightmare.  What do you think?

@William Hochstedler   Now you make it even more complicated by throwing in the lien situation.  I'm thinking the liens might not get wiped out if the original owner is still part owner.  This is just going to mess things up for lots of people....and maybe the taxing entities too.

I emailed this question to the county assessor and he said, "

The liens question is tricky and the scenario you are describing has not happened yet. The best answer I could give you in that situation is that you would need to contact a real estate attorney and immediately take whatever actions in a court to secure your interest.

The only action the county takes is the notification of the parties that have a recorded interest, the sale of the property, and the issuance of the tax deed. Whatever steps that you, as the winning bidder, would need to take to secure your interest are up to you. Beyond the notification and the sale, the county is not empowered within the law to anything more than that."

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