last minute strike-offs on tax sales?!

25 Replies

I reside in Houston and have been attending sheriff tax sales on the courthouse steps for a while. I've been doing my research and normally narrow down my potential buys to about 5 properties. It seems time and time again the properties get struck-off the night before or the morning of the auction.

So my basic question how does this "really" happen? People that don't have money for several years all of a sudden get if off the auction list the day before because they mysteriously found money? Or is there some other angle that gets played behind the scenes that I'm not aware of?

Thanks in advance for your response!

Bump. Still no answers?

Originally posted by @Mark Mays:
I reside in Houston and have been attending sheriff tax sales on the courthouse steps for a while. I've been doing my research and normally narrow down my potential buys to about 5 properties. It seems time and time again the properties get struck-off the night before or the morning of the auction.
So my basic question how does this "really" happen? People that don't have money for several years all of a sudden get if off the auction list the day before because they mysteriously found money? Or is there some other angle that gets played behind the scenes that I'm not aware of?

Thanks in advance for your response!

@Mark Mays

Have you checked if the properties you are after are also posted on a website? I know auction.com sells Houston foreclosure properties at their website and if not sold then they go to the sheriff tax sale. I don't know but that is the only thing that comes to my mind.

Hi Dennis. Thanks for your response. No, these are actual tax sale listings. Not via a separate seller or website. Conducted by the constables.

Do you mean that the properties are redeemed by the owners before the sale, thus taken out of the sale? My understanding of "struck off" properties is that they are the properties that didn't sell to 3rd party buyers and that counties in some states sell over the counter to the public.

If you mean redeemed: Yes, people come up with money at the last minute, but many go into contract and/or sell at the last minute with investors that have resources to redeem with cash right before the sale. There are investors working the the tax sale lists everywhere I know of and they are your competition before the sale.

I work tax defaults. I don't want the property after it gets to tax sale. You'll pay way more than I will. :

That being said, sometimes tax sale is the cheapest and best way to fix a complicated title flaw (think several generations of deceased persons and all their heirs). But tax sales also expose the property to the public in an auction environment. In hot markets most of the good tax defaulted properties are not going to end up being offered at tax sale.

Mark I had the same problem in California and would definitely like to investigate the answer. All the lots I wanted were removed from the list before the auction day and everything I purchased were on the spot decision based on google maps. In terms of the removed items, I met some people at the county redeeming their lots. Some seemed like the owners and other seemed like loan sharks. I read that if you are able to reach the owner and able to pay him a small premium to buy the lot then go on to pay the taxes both parties could still be better off.

Thank you Annuciata. Your last sentence is exactly what I am suspecting happens. The curious part about that is why does it happen the last day before the auction. If one was a loan shark why wouldn't they be on it weeks before the sale and get it done? The only other thing I can think of something from the inside the constable's office happens, but surely that would be unethical if not illegal?

Originally posted by @Mark Mays :
Thank you Annuciata. Your last sentence is exactly what I am suspecting happens. The curious part about that is why does it happen the last day before the auction. If one was a loan shark why wouldn't they be on it weeks before the sale and get it done? The only other thing I can think of something from the inside the constable's office happens, but surely that would be unethical if not illegal?

My experience is that there aren't that many loan sharks or hmls involved in redeeming props from tax sale. If you looked at the data I doubt you'll see many loans recorded against those properties. It's often investor buyers working with the seller prior to sale. They are often pretty shrewd deal makers and pretty good deal negotiators. But it's also lots of regular folks coming up with money to stay in their house or keep their deceased relative's properties, including junk land. If, indeed, buyers are getting loans to save the properties from sale, I can assure they are going to do it at the last minute. If they didn't pay taxes for 5 years (in CA), it's not like they wake up one day and start taking care of business in an efficient and effective manner. I see properties get saved from tax sale, to be offered five years later and then saved again. Some people just don't pay until they have to.

The number of defaulted props listed for sale compared to those that actually go to sale has always been way greater.

Here in CA you can get the property removed from sale by filing BK right before the sale.

Thanks for the reply Kristine. That makes a lot of sense. Since the list of properties that will be included in the tax auction is posted a month before the auction, that would give shrewd investors a month to approach the current owner and try to negotiate a deal. Do you know of any good information of how that happens? Not so much the letter or the phone call, but the whole legality of the deal. How do you make sure the deal is official and all the i's are dotted and t's are crossed?

Several ways this can happen.

Friends, family, some social service organization gives the property owner money to pay taxes.

Income tax refund gives them some cash to pay.

Have the property under agreement to be sold, or actually have a closing that makes the property sold and back taxes paid off.

Mortgage company decides to pay tax bill at the last minute.

Work out a payment plan with the tax collector.

Get a court order from a judge to postpone the sale.

Declare bankruptcy and receive an automatic stay.

Probably many more that I missed.

Originally posted by @Mark Mays :
Thanks for the reply Kristine. That makes a lot of sense. Since the list of properties that will be included in the tax auction is posted a month before the auction, that would give shrewd investors a month to approach the current owner and try to negotiate a deal. Do you know of any good information of how that happens? Not so much the letter or the phone call, but the whole legality of the deal. How do you make sure the deal is official and all the i's are dotted and t's are crossed?

Not sure I understand the question. There's is nothing special about buying property before tax sale. It's just like any other property. Execute purchase agreement, pay off tax debt or mortgage debt and get deed. Don't pay off debt and you lose property.

BTW, the tax default occurs WAY before the published tax sale list. It's just that owners and investors start to scramble when the sale list is published, as those properties are more likely to go to sale.

My strategy in purchase was to go for the least desired properties. I left all the houses out of the picture. I came with a couple of real estate brokers, they expected to bid on houses while I came expecting to bid on land. In the end the houses went for more than market value. I wasnt entirely happy initally with what I had. One in particular is just a 2750sf lot. When I called the city she sort of laughed and said how am I going to fit a 2 car garage as well as build a house on it! but if you look at the lot you can see the ground is raised. So my goal is to go subterranean. I have never built from ground up before but at least I have something to start with.

Originally posted by @Annunciata R. :
My strategy in purchase was to go for the least desired properties. I left all the houses out of the picture. I came with a couple of real estate brokers, they expected to bid on houses while I came expecting to bid on land. In the end the houses went for more than market value. I wasnt entirely happy initally with what I had. One in particular is just a 2750sf lot. When I called the city she sort of laughed and said how am I going to fit a 2 car garage as well as build a house on it! but if you look at the lot you can see the ground is raised. So my goal is to go subterranean. I have never built from ground up before but at least I have something to start with.

Whoever said that to you doesn't build houses. As long as the set back rules aren't ridiculous and as long as you don't run into any solar access issues, you can easily build a home with appropriately sized garage on 2700 sf. All kinds of HOAs in CA have similar sized lots that have off street parking and garages. Check out the Bay Area if you want to see what can be done on 2500 sf lots. And that's without going subterranean.

thank you for the encouragement Kristine. The lady was a city clerk, I forgot to mention the real challenge is that the land is triangular so it has posed some challenges. In cases like this I can see clearly why the owner has just let the property go. I have applied the setbacks in sketchup and see that the only way forward in having a modest sized house is having the garage underground. However if the land was not raised it would really be a bigger issue.

Originally posted by @Annunciata R. :
thank you for the encouragement Kristine. The lady was a city clerk, I forgot to mention the real challenge is that the land is triangular so it has posed some challenges. In cases like this I can see clearly why the owner has just let the property go. I have applied the setbacks in sketchup and see that the only way forward in having a modest sized house is having the garage underground. However if the land was not raised it would really be a bigger issue.

Well, I did assume a rectangle, with at least 35-40' street front. Even with elevation/grading issues I can imagine making 2700 sf work. You're braver than I am for taking on that triangle!

Thanks again, I had no choice as I didn't want to leave the auction room empty handed when I realised everything I came to bid on was gone I had to bid on something! Naturally no one else wanted this!

Interesting piece of property Annunciata. Out of curiousity what is a piece of property like that worth in your area, vs. what you paid? Does it make sense to just sell the land, or is it only worth it if you put a house on it?

@Mark Mays

I paid 11K for this. I actually haven't analysed selling it. However there are no lots I have seen for under 50K around here. My only intention has always been to develop as I am on a mission to get into the development industry. This was one of my least favoured lots. Have you bought anything yet?

Thanks for info. I have 2 other properties besides my primary house I live in. However, those were acquired by more traditional routes. I have been trying like heck to get this tax auction stuff to be successful, but at the end of the day I just go back home with my cashiers checks. That's why I figured there was another way to game the system and some of the other responders have clued me in on how that is. I am now thinking that if there is really a good piece of property/house going to auction, the odds are the savvy investors are getting to it BEFORE auction. Those guys are probably profiting the way I want to. Thinking that is the avenue I need to try to take for my next acquisition.

Good to see a face Mark! I don't think the Savvy guys are getting it at the best price though. I remember one lot that I really wanted. I hunted the owners details online and each time I called the mailbox was full. I knew there were many investors doing the exact same thing. I had been looking for property in the LA area for about 3 or 4 years and placed over 50 offers which were not accepted so I could not afford to go home empty handed. To make matters worse the LA auction is only held once a year so I was certainly under a lot of pressure to take something home.

Most of the lots I purchased had no other persons bidding on them. The assessors value of everything I spent is 7times the purchase price. The question is you need to know what your strategy is. Are you looking to flip for a quick profit, hold, develop etc once you know what your goal is things may be easier.

Originally posted by @Annunciata R. :
Good to see a face Mark! I don't think the Savvy guys are getting it at the best price though. I remember one lot that I really wanted. I hunted the owners details online and each time I called the mailbox was full. I knew there were many investors doing the exact same thing. I had been looking for property in the LA area for about 3 or 4 years and placed over 50 offers which were not accepted so I could not afford to go home empty handed. To make matters worse the LA auction is only held once a year so I was certainly under a lot of pressure to take something home.

Most of the lots I purchased had no other persons bidding on them. The assessors value of everything I spent is 7times the purchase price. The question is you need to know what your strategy is. Are you looking to flip for a quick profit, hold, develop etc once you know what your goal is things may be easier.

The assessor reassesses within a year of sale or transfer. He will re-assess your lots for what you bought them for at tax sale. This will happen in the next year and you will receive new tax assessment notices letting you know of the change. Do not use tax value in CA to determine value. Ever.

I am aware of that, I don't actually use previous purchase prices as actual values either. Alot of the assessments were done in 2007 when prices were simply over the top. For some reason I received a check for one reassessment. I did not think I would be entitled to a check on reassessment. The property was located in Glassel park - city of Alhambra

Have you given any thought to making the house itself subterranean and just the big garage above ground? This would allow you to build the house out right to the property lines without any setback restrictions.

stephen
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Originally posted by @Annunciata R. :
thank you for the encouragement Kristine. The lady was a city clerk, I forgot to mention the real challenge is that the land is triangular so it has posed some challenges. In cases like this I can see clearly why the owner has just let the property go. I have applied the setbacks in sketchup and see that the only way forward in having a modest sized house is having the garage underground. However if the land was not raised it would really be a bigger issue.

Hey @Stephen S. I was hoping to go subterranean but the other way round, by having the garage and a basement underground and the house on top I feel that I will introduce more light which is a key factor for me. I am playing with the size of the lot by using two 40ft containers on the underground level and perhaps one 40ft and one 20ft on ground level. Im thinking that too much reinforcement will be required if the garage is made to be on top however I certainly think we are on the same page. Now to find those subterranean specialists out there...

Anything you build underground can be build right out to the property line. I was thinking of the square footage which can be gained.

stephen
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Originally posted by @Annunciata R. :
Hey @Stephen S. I was hoping to go subterranean but the other way round, by having the garage and a basement underground and the house on top I feel that I will introduce more light which is a key factor for me. I am playing with the size of the lot by using two 40ft containers on the underground level and perhaps one 40ft and one 20ft on ground level. Im thinking that too much reinforcement will be required if the garage is made to be on top however I certainly think we are on the same page. Now to find those subterranean specialists out there...

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