Investor · Austin, TX · Member since 2012 · 47 posts · 13 votes
I am looking at a property on a tax sale list in an up and coming neighbor hood. I tried to search for liens or loans on the property and couldn't find any other than the tax arrears owed. (about 11k)
1st question: what is the best way to find out about liens and loans on the property. (don't have property radar in Texas yet)
(went to the tax assessors site and found 2 liens. one for cleaning property and one for the taxes owed) what else should I look for?
2nd question: what to do if I purchase and want to do a tear down and spec build? There is a 6 month redemption period on the tax sales in Texas. Can I start planning and demo before the 6 months is up. What if I tear the house down within the 6mo redemption period and they decide they want to pay arrears.
@Christopher Gilbert I have had this conversation with several real estate attorneys in Texas. The redemption period is established on the day the suit is filed by a taxing authority; as established with the county appraisal district, and it's issuance of the appropriate exemption.
The title company that was telling you two years, was not correct. I have had some try and tell me as long as twenty years. I would suggest you find another company that understands the tax laws of Texas when it comes to redemption periods. The majority are clueless when it comes to this topic simply because they do not deal with it frequently.
The law that requires two years, is if the property for sale has the following exemptions at the time the suit is filed:
Homestead
Agricultural Use
Mineral Rights
All other types get six. So, if a property had a homestead exemption in place by an owner ten, twenty or even fifty years ago, is irrelevant. Texas Tax Code 34.21 is the law that explains the requirements for length of redemption period.
I will suggest you; to check the date the county file the tax sale (which year). If the year was registered as owner occupied or farm use at that time.
The redemption period will be 2 years.
@Richard D. will be able to help with TX tax sale questions
@Jason Carter check with the county clerk there, they will probably need the legal description in order to look up the liens. Also, owner history will help, the most likely can search by owners name. If there is 1 mow lien, then most likely there is more.
As for demolition of the property, wait until the redemption period has expired. Another option you have is to obtain a quit claim deed from the previous owner. If you are able to obtain one, then there would be no need to wait for the redemption period to end, as long as there isn't any other lien holders. Double check with an attorney to verify none of them have a right to redeem.
Finding all the liens is one of the tricks of the trade that helps separate the serious investors. I recommend working with a title company as they can get full access to everything. There are several websites that you have to visit depending on what districts are involved with the property as well as other things like IRS liens, child support, hospital liens, etc. but it took us a long time to find them and believe me, no one at the auction is going to give that information out easily. Some of them stick with the property and some get wiped out after the property is sold at auction.
Even though the county calls out a 6 month right of redemption the state has a law requiring 2 years for anything that has (or once had) a homestead and you will have a hard time convincing a title company otherwise. We learned that lesson the hard way when we bought a piece of vacant land at auction and turned around to sell it after six months. Turns out there used to be a house on it 50 years ago and the title company would not let the deal go through.
I would not invest a penny into the property before the right of redemption unless you can rent it out as-is. The former owner has the right to redeem which they very rarely do but they can be convinced by another investor to redeem it if the incentive is there.
@Christopher Gilbert I have had this conversation with several real estate attorneys in Texas. The redemption period is established on the day the suit is filed by a taxing authority; as established with the county appraisal district, and it's issuance of the appropriate exemption.
The title company that was telling you two years, was not correct. I have had some try and tell me as long as twenty years. I would suggest you find another company that understands the tax laws of Texas when it comes to redemption periods. The majority are clueless when it comes to this topic simply because they do not deal with it frequently.
The law that requires two years, is if the property for sale has the following exemptions at the time the suit is filed:
Homestead
Agricultural Use
Mineral Rights
All other types get six. So, if a property had a homestead exemption in place by an owner ten, twenty or even fifty years ago, is irrelevant. Texas Tax Code 34.21 is the law that explains the requirements for length of redemption period.
Unfortunately our experience has been that regardless of what the law states, the title company that has to write the title insurance has the ultimate say in how long you have to wait. Some title companies understand and are reasonable but most are not. We have only found one title company in the Austin area (Independance Title) that is willing to do the two years if there was ever anything close to a homestead on the property. Most of them have been in the 4-6 year range which is rediculous.
Again, the county and tax code can say six months all day long but the company that underwrites the title insurance has the final say. It is their risk and their internal policy, not the state of Texas or the county that you are in.
I would assume going into the deal that if there was a house there is a chance of a homestead and plan on holding it for two years. If you can find a way to do it in six months then great.
We are in a situation where we bought a property at the tax auction here in Texas. It is not a homestead so the former owner can redeem it for 125% of "Costs" within 6 months. The question is the definition of "Costs."
I found that Costs includes "the amount reasonably spent by the purchaser for maintaining, preserving, and safekeeping the property, including the cost of: property insurance, repairs or improvements required by a local ordinance or building code . . ."
My understanding is that the property cannot be rented out until it meets code. Now that 125% includes all the additional *allowed* Costs.
So, I can't go in and start knocking down walls but I can repair that hole in the floor/wall and bring the wiring and plumbing up to code.
Too, I've found that the former owner can't just show up on my doorstep with a check. (S)he must petition the court that handled the auction because there may be other liens, etc. that need to be added to her costs.
(When I started this, I felt like it was going to be a learning experience.)