Flipper/Rehabber · Abilene, TX · Member since 2014 · 25 posts · 2 votes
I ran across a vacant distressed house today in between my appointments to meet with expired mls. The neighbor says that it has gone to auction and ended up not selling because of back taxes owed.
Several years back I bought a package on how to locate these properties, purchase and keep them. Unfortunately I never got around to researching before I lost the books and dvds.
Someone also once told me that "they paid property back taxes to purchase a property and it ended up being reclaimed." Truth to their story? It's a coin toss.
I'm sure that I would have to speak with a real estate attorney regardless.
However, I would like to know if anyone has acquired property using this method and what your experiences were/ are in these types of deals...
I'd love to know how to grab these before they rot away and fall down.
*Also, I just cross referenced CAD with name and physical address and ran a search. It brought me to an obituary listing of an only child "preceded in death by" OWNER.
I don't know if that changes the process but I would love to know
@Brennon Manske the correct answer to your question is going to be state specific as each state has their own laws on tax sales of real estate and the redemption periods.
The gist of how it works is, anyone can pay the taxes owed on a property at a "tax sale" which can be live auction style or online (depends on jurisdiction). I don't know of anywhere where you get instant ownership of the property from a tax sale.
Usually there is a "redemption period" (what you referred to as the property was reclaimed, which may be the correct term for your area?) that allows the owner who owes the past due taxes to pay the taxes and penalties to "redeem" their ownership rights to the property. The redemption periods can be a matter of months or as much as 5 years.
Many times, investors will pay the taxes, never expecting to obtain the properties. They only want to collect the hefty penalties of 12-18% from the late tax payers as a way of getting high returns on low risk investments.
@RobertLeonard thank you for your feedback! ...I barely slept last night. I couldn't stop thinking about this one. I was tearing apart the storage at 7am looking for the literature on this subject.
I called a few local investors that I work with and they don't invest time on these types of deals and couldn't offer much info.
What about abandoned property that has already gone to auction, didn't sell and the owners are deceased? I realize that something scared an investor away from it once but the other part of me says that there has to be a way to obtain these if you are willing to do the work...I AM WILLING.
I've never seen an abandoned house with back taxes that didn't have pages and pages of liens from the city either. I saw one on here somebody was selling the note for in the dallas area. It was marketed as needing "cosmetic updates". I looked on Roam and it had 2 notices of condemnation on it, plus had 4 pages of liens for lawn mowing, boarding up the windows etc etc etc.
@Brennon Manske when you start talking about abandoned property of a deceased person, you add another layer of complexity. Those rules are different from state to state based on probate, inheritance and adjudication laws that determine if the property is taken over by the municipality due to an excessive amount of back taxes and liens for things like grass cutting.
Your best bet is to talk to the local investors you can connect with and see why no one else is after such properties. It may be that the process is nearly impossible or that they aren't willing to do the work like you are? Definitely dig in to the facts from the written law and don't take anyone's word for what you can or can't do. You would be surprised how many people will accept a prevailing attitude or practice to be the law or "the way it works."
The answer to your questions are all matters of state law and local ordinances. You'll know you have the definite answer when you see it in writing.
Keep in mind that there are "Tax Deed" states and "Tax Lien" states. In a tax deed state you are bidding at the tax sale auction for a deed to the property, but that is still subject to a redemption period. So, you own the property subject to the redemption period. (Don't do any rehabbing until the redemption period lapses.) In a tax lien state, you bid on obtaining a lien on the property. After the redemption period you can obtain a deed from the county which could be a long time. But you do not own the property (yet) so you do not have any ownership rights, such as entering the house, doing repairs, etc. Also, Title companies are very wary of tax sale properties and you may have trouble getting title insurance (and hazard insurance.) While good money can be made, an attorney, who has knowledge of tax/lien sales) is definitely needed. Also, contact the owner and offer cash for the redemption right, with the correct document. .
@Shawn Thom Thank you for your response. I'd be willing to bet that this would fall into the same category. A lot of fees, headache and time. There is no telling how long it's been sitting there. If it's the headache that scared other investors off I will deal with that. If it's the return that falls short, that would put an end to my burning desire to snag it. *as the tune "high hopes" rings in my ears
@Robert Leonard Thank you again. That's what I was thinking as well.. another layer to dig through. I am going to keep digging and researching. I spoke to another investor that I work closely with this morning. I explained to him that it just so happened that I had a buyer call me yesterday that is looking for 250-500k rehabs and this would fall into that category. He said, "if you feel that strongly about it find out what it would take..just don't let it distract you and cost you money on other deals in the process."
I will definitely keep you guys updated on what happens with it.
Abandoned properties can be obtained even with liens. But the ease of doing so varies with the type of lien. City/county blight liens are the easiest, albeit not necessary fast. The purpose of city liens is to maintain a certain level of neighborhood value. Blight hurts value and neighbors complain. However, first and foremost the city wants the blight fixed, not necessarily the revenue. I have had success going to the city and talking to the Building Department and to a City Council member to negotiate that I would buy the house and fix all of the blight upon purchase if I could have 45 days to do so and if they would then cancel the liens with no payment due. (The city council has to approve this.) Obviously do all work with permits. They will inspect. Here in California there are many communities with abandoned houses the neighbors hate. Old mechanic's liens can often, but not always, be purchased from the lien holder at a big discount especially if the lien is a few year's old. Offer 10% to start. For IRS liens, the IRS will often (more often than people think) discharge the lien against the property (but not against the individual) if the house is abandoned or in bad condition. There is IRS Form 14135 - Application for Certificate of Discharge of Property from Federal Tax Lien.
@Brennon Manske If you can find the person that holds the redemption rights, you can often purchase those separately.
@Robert Davidson Thanks for bringing up the fact that a lot of the blight fines can often be negotiated. Taxes will not budge but the blight type fines will can often be reduced or eliminated.
@Brennon Manske , I would reach out to Arnie Abramson at Texas Tax Sales.
I have not done one of these but would be interested in the process as well. Their website is www.txtaxsales.com. As I understand it they will partner with you on the right deal.
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