Buying property with lien

13 Replies

I really hope some seasoned investors can help with this issue.

A duplex has come up on the MLS for 300K. It's in a highly sought after area and priced at $100 per sq ft which is well under market value.

The listing states the property has a large lien with the city. I called listing agent and he said there is a 600K lien and mentioned a bathroom which was built without permits. I looked up county records and the only document I can find is 1 work without permits warning letter.

I called the city to find out about mitigating the lien after I correct the violations. They said they do not discuss that until you actually become the property owner. My fear is buying a property and being stuck with a huge lien which the city won't reduce.

Does anyone have any history of buying a property with a large lien and if the city is happy to reduce or waive the fines (after violations are taken care of)? Or are they money hungry and just want to make as much money as they can?

What type of lien is it? Have you done a title search to find out ? If it's a tax lien then the jurisdiction will sell it if it's a tax lien state or foreclose on property in a tax deed state. Typically they sell it one way or the other to an investor. I am not aware of any jurisdiction ever negotiating a lien so I would walk away.

I would suggest doing some more digging with the City...show up in person with some chocolate if you have to!

Every municipality is different, so it will be hard for people to give specific advice.

In my experience, some liens (for permitting or code violations, generally not taxes) can be waived, and some cannot. It depends on the details, the type of lien, and the City's rules & procedures.

And even if it can be waived/forgiven, it's probably not a sure thing on the front end. You'll probably be at the mercy of some type of magistrate or board of appeals.

Liens are public records.  I can see why they won't negotiate with you but you should be able to find how much it is without a lot of hassle.

This is a code violation lien, and yes they won't give you a "hard" number until it's corrected.  Which city?  Some locals here may have experience in Dade.  If you poke around long enough, you can find a code enforcement officer who'll give you a good idea.  I know some cities I'm familiar with, it's 10% or less of accumulated "fines" but any "hard" costs will not be waived.  Broward can be tougher with some cities at 30%, no matter what.  And if it's Miami, a lot of the wheels there expect to be greased...just the culture there.

The lien itself is only on part of the question. The other part is how much will it cost to correct the violation? 

Originally posted by @Chris Seveney :
What type of lien is it? Have you done a title search to find out ?

If it's a tax lien then the jurisdiction will sell it if it's a tax lien state or foreclose on property in a tax deed state. Typically they sell it one way or the other to an investor.

I am not aware of any jurisdiction ever negotiating a lien so I would walk away.

 Chris, I didn't mention anything about a tax lien. I said this was a lien for building without permits and building violations.

Originally posted by @Jeff Copeland :

I would suggest doing some more digging with the City...show up in person with some chocolate if you have to!

Every municipality is different, so it will be hard for people to give specific advice.

In my experience, some liens (for permitting or code violations, generally not taxes) can be waived, and some cannot. It depends on the details, the type of lien, and the City's rules & procedures.

And even if it can be waived/forgiven, it's probably not a sure thing on the front end. You'll probably be at the mercy of some type of magistrate or board of appeals.

 Good suggestion Jeff- go to the city with chocolates! I am sure I can obtain a lot more information by going there in person. I'm a bit awkward about taking gifts; feels like bribery to me!

Does it go through an appeals board and a magistrate? I thought it was up to an individual inspector.

Originally posted by @Bob B. :

Liens are public records.  I can see why they won't negotiate with you but you should be able to find how much it is without a lot of hassle.

 The city told me they charge $250 to give out the lien records. I probably don't want to shell that out unless I actually have an accepted contract with the seller.

Originally posted by @Wayne Brooks :

This is a code violation lien, and yes they won't give you a "hard" number until it's corrected.  Which city?  Some locals here may have experience in Dade.  If you poke around long enough, you can find a code enforcement officer who'll give you a good idea.  I know some cities I'm familiar with, it's 10% or less of accumulated "fines" but any "hard" costs will not be waived.  Broward can be tougher with some cities at 30%, no matter what.  And if it's Miami, a lot of the wheels there expect to be greased...just the culture there.

 Thanks Wayne, very helpful information. It's Miami Dade. I like your statement 'wheels there expect to be greased'. You are right on the money (excuse the pun). I've actually found Miami Dade inspection and enforcement officers to be extremely helpful in the past. 

Originally posted by @Jacques Wurms :

The lien itself is only on part of the question. The other part is how much will it cost to correct the violation? 

 Yes 100% correct.

This does not sound like a deal you are going to get without spending some money. To me this is a case for a real estate attorney to handle for you even the due diligence on it and let him get as much information , detail or procedures for you. I have been building for over 30 years an found in most cases what the city wants is to see evidence the code violations have been cleaned up and removed period. Then you can proceed from there. Since they will not deal with anyone who is not an actual owner of the property this may be one deal you will have to pass up. $600K wow! that is the highest code enforcement lien I have ever heard of. 

You might get the current owner to go down to the local building department and the code enforcement department if they are separate and find out exactly what he or she has to do to get the lien removed then at least you will have that much more knowledge, an anchor for a possible deal. 

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