Looking to buy tax liens in Texas at the auction.

3 Replies

I am wanting to learn how to properly purchase tax liens in Texas at the auctions. The reason I say "properly" is because I had gone to one several months ago and bought a property, long story short I ended up bidding on the wrong one and got a junk mobile home that was literally almost split in half. luckily they redeemed it and I was able to get my money back plus 25%. I have been doing quite a bit of research on it and I feel like I have a good gist of it but I still have a few questions.

1.How do I go about doing a lien search, where do I go to find out if they have any IRS liens, Handyman Liens, HOA Liens etc?

2.How do I go about reviewing the tax suit (the property i "accidentally" bought was redeemed by the mortgage company and they stated that they were never notified of the tax sale so they redeemed it which I had no problem with at the time but I want to make sure that does not happen again.

3.How can I find out whether the property is homestead or non-homestead 

4.How can I find out whether there are back taxes or not (there was back taxes for the property I bought which amounted to 1600 so I had to pay those off as well as the money spent on the auction) 

5. is it possible for me to buy the Right of redemption of the owner. (with the previous property i had bought their was a "for sale by owner" sign in the front so i called the number thinking it was the owner to let them know I was going to be removing it and that the property was auctioned off to me at the tax sale, long story short it ended up being these 2 guys who had nothing to do with the property that said they could link me up with the owner and sell me the right of redemption. Me being 20 years old and not knowing much I got excited and agreed to purchase them for 5k we set up a date to close at the title company but I never showed up because I found out that they had nothing to do with the property and they were just going to make a quick 3k off me and give the owner 2k for the rights.) 

So I am wanting to know if its legal for them to do that and is it legal for you to purchase "the rights of redemption" so I would not have to wait 6 months. 

as you can see my first purchase was a great but scary learning experience for me but I don't want to make the same mistakes again. 

Can anyone point me in the right direction and help me out if I missed anything else I should know.

Hey Christian,

The answers to those questions are what separate the pro's from the rest of the bidders and you will have a tough time getting that information out of anyone that actually knows how to do it.  We see people every month buy properties without knowing all the liens that apply and cringe knowing that they just bought a big headache.

1.  Failing to perform an adequate lien search is the number 1 deal killer and biggest mistake most people make.  There are several websites depending on the county that you are looking in that usually can help you research different types of liens (you are going to have to find these yourself).  Some counties may require you to take a trip down to public records office.  In general, keep an eye out for liens that don't get extinguished with a foreclosure such as child support, local property tax, mechanics liens, etc.  Most liens like IRS, etc. can be removed when the ownership transfers but unless it goes through a formal foreclosure process you will have to try and negotiate them away.  We typically have to look at four or more different websites and search by address AND variations of the owners name(s).  This will get you about 90% of the liens, for the rest and a safety check work a deal with a friendly title company, even if you have to pay them for each search. 

2.  You have to dig and find the legal documents related.  Most of the tax suit documents are in public records somewhere (court case, etc.) but there are often documents such as mortgages etc. that you may not be able to access.  Some liens get slapped onto the property the day before the auction because people know the property is getting sold and they want their cut.  We had a $75k IRS lien added to a $60k property hours before we bought it.  We were able to get it removed but the IRS took almost a year to do it.  No lien check would have caught that one.

3.  County tax appraiser office.  You have to be careful though, even if there is not a record of a homestead, if there is a house or USED to be a house, most title companies will default to homestead holding requirements regardless of the status which means much longer hold periods.  Shop title companies to find one that reasonable wait periods.

4.  County tax appraiser office.  If there weren't back taxes there wouldn't be a tax lien so always get that information first.  Liens could go back dozens of years and can get big quickly with penalties.

5.  I have never heard of buying someone's "right of redemption".  Usually tax auction properties are there because the owners are deceased and have no direct heirs to pay the taxes.  You would have to get a quit-claim from the previous owner but my guess is that a title company would still make you wait the amount of time.  They are the ones giving the title policy so it is their rules that matter.  If the previous owner couldn't pay the taxes they won't buy back the property.  The bigger threat is that another investor pays the owner to buy back the property, but at least you get your 25% profit.  Just do NOT make any improvements to the property during the holding period, you will not get your money back on those.

Also be careful, in Texas the state says a 6 month redemption on non-homestead property but that doesn't mean anything.  Depending on the city or county the property is in, the title company will default to the longest time required, usually 1 year.  With a homestead or "possible" homestead it could be two years.  We have had title companies say 3 years.  No bases for it, was just what they felt comfortable with regardless of what the state said.

Stick with it, start small and learn your lessons up front.  It will pay off in the end if you are diligent about always following your process.

@Christian Reyes There is a good website www.netronline.com that will get you the recorder's office for all of the counties in TX.  If you go by the owners name you could get the type of lien you are looking for to see if it exists on that property owner.  IRS liens do not go away, nor do State, county or city liens ie: weed abatement, grass cutting, water and sewer bills, or any type of special assessment liens. They will go along with the property.  Mechanic liens will be wiped out at the time of foreclosure. One of the main things to remember is to make sure all interested and by interested I mean anyone, including mechanic lien holders, that have any kind of interest in the property such as Mortgage, IRS, etc.  All liens must be recorded in order to have validity.  Once you have the list of who gets notified then once the notifications go out, you could use a legal service or a lawyer for the notifications, then the clock starts ticking.  If it is a normal wining bid as to how you acquired the tax deed then you also  have other rights at the time.  You can collect rent, live in, rent out etc. until the redemption period is up at which time you have not received your investment with interest back, you continue with the foreclosure/tax deed process.  With a homestead exempted, military exempted, disability exempted, or government exempted property the time line is up to two years.  The bottom line is your timing on notifications.  Most counties will do the notifications for you but as mentioned above, it could take up to three years because the paperwork was not filed correctly.  There are also after thee auction properties you can make offers on because they have already gone through two sales and are now considered "struck-off".  Some counties will still have sales on struck off properties but if you are utilizing the school districts, municipal utility districts you can submit and offer with a sealed bid and if  your bid is accepted your the winning bidder without the heat of the auction.  

Since most of the properties in Texas are handled by a law firm that is an acting Trustee of the County then you will already be dealing with lawyers.  You can acquire some great deals this way. 

@Christian Reyes The way to find a homestead exemption or any type of exemption is on the appraisal district for the county you are looking at in TX.  You will enter in the account number and that will go under the geo search engine.  Once the info or details come up you will be able to click on them and scroll down to see the exemptions.  It is easy to find but the type of exemption will be listed under the exemptions if it is an exemption for disabled, military, or if it a homestead it will be listed.  You will also be able to find the listing of the exemptions as to what the acronyms mean so you will understand what exemption it is.  No matter what if there is an exemption on the property that changes the redemption period from 6 months to up to 2 years.