why pay assessments

Question

I bought a house with two lots. The sale price was low due to $25,000 in assessments. The lot next to the house is smaller, but has $19,0000 of the total assessments for street and sewer. Reason is the previous owner put those assessments in deferral. Interest caused the assessments to go up to where they exceed the land value.

Any reason to not let that parcel go tax forfeit?

Ned Carey · Answer

It sounds like your title company screwed up. What did your original contract say?  Were you buying "free and clear of all encumbrances"

I doubt it would affect your credit but I don't know haw they handle things there. The lien is against the property not you personally. I think you need some legal advice and need to make a claim against the title insurance. But Again I stress read your original contract and your title policy to make sure there  was not an exception for the assessments.

Dan Vleck · Answer

It is a buy and hold and I just signed a lease.  Cashflow is $500/mo after piti if I let the little parcel go.  Much less cashflow if I keep it.  As a landlord, I don't like extra land because land can't be depreciated.  I'm letting it go if the survey shows that setbacks are adequate for the house.  If setbacks require me to keep the parcel, I'll follow your advice and try to get a reduction of liability.

Thanks.

Zach Kidd · Answer

I don't know particulars about Minnesota.

However, everything is negotiable.

First step would be to figure out who is the decision maker when it comes to tax liability. Don't hesitate to escalate. Make them explain it to you. Be the squeaky wheel, but be really, really nice about it. Be very clear that you want to make it right by them, and you want them to help you too. Mutually beneficial relationship.

Consider getting advice from an attorney, etc. You obviously want the best strategy for your side, but also a better understanding of the consequences for the city side. How much will they lose in a tax sale, etc.?

Secondly, what is (was?) your strategy with these properties?

I'm venturing a guess. Take the two, combine, maybe improve a bit, resell, make a profit, move on.

If so, your acquisition cost was lower because of the taxes. Push forward, attempt to lower the tax liability, combine the parcels, make any minor improvements, list it & sell it.

If you can get it to break even, great. That's solid PR for you as an investor. You worked closely with the city officials to improve a property and fix the tax problems. That's worth a blurb in the local newspaper.

If you turn a profit, so much the better.

Dan Vleck · Answer

@Ned Carey thank you for your response.  This is new territory for me.  I always pay my bills, so not paying something is awkward for me.  I know developers do it, so I thought I should consider this approach.  When I asked the city if I could negotiate the tax liability, they chuckled at me and said no.

I bought the house and land through a title company on a line of credit cash purchase, and received title insurance.  I don't know why the assessments weren't due on sale.  I guess assessments are just put on the taxes and as long as payments are current, they aren't due on sale.  There were no back taxes, just current property taxes that included assessments for road and sewer and the deferred assessments on that little parcel next to the house, which the city said payments must begin now due to the purchase.

I'm just a bit concerned this might affect my credit or reputation in the community.

Ned Carey · Answer

I can't speak for Minnesota but here in MD I wouldn't hesitate to let a property go for taxes.

How did you buy the house if back taxes weren't paid off? Did you have a title company handle the sale and did you get title insurance?

Dan Vleck · Answer

Anyone ever let a property go tax forfeit?

We're there any bad repercussions?

why pay assessments

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