Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
I've talked to a homeowner who inherited a home from her mother, hasn't paid taxes since 2008, and doesn't want anything to do with property - no profit from sale at all, just wants out. Per the tax lawyer the taxes and fees amount to about $30,000. The property is worth about $90,000. So it appears to be a great deal.
I'm really looking to find out is (since I've never purchased a property this way before) is how exactly would I go about making the purchase? What would be logical steps to lock this down? Thanks all.
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
13y
Jason Patterson
Do your due diligence!
With tax sale properties ALWAYS:
1. Inspect the property, these properties often have major problems that either the owner knows about and is passing problems on to a new buyer, or they don't know about but through neglect or ignorance have heightened.
2. Do a title search to know what other liens, judgments, mortgages, etc could be out there. IRS tax liens are of real concern. Title defects can also be a problem. Some people intentionally let properties go to tax sale that they otherwise could not sell.
3. Know the rules of your specific sale. 50 states have 50 different rules in this case all real estate IS local. What liens if any are wiped out? Is there a redemption period? etc.
4. Obviously, know local values.
If you have done all the above and things are clean and to your liking, then proceeding to purchase the property before the sale will eliminate all you competition, unless they have also contacted the seller.
Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
13y
When you said tax lawyer, I am guessing you mean the attorney who the state of Texas turned the delinquent account over to collect the taxes.
Maybe I am oversimplifying this. I see two options:
1. Negotiate an acceptable purchase price where the tax amount is deducted from the seller’s proceeds at closing.
or
2. Owner’s asking price less $30,000 equals your offer.
In reality, who pays is not important, just as long as the taxes and all associated costs are paid at closing. A selling point for you is to negotiate with the seller their bottom dollar if you pay the taxes for the seller. As you calculate the acceptable negotiated purchase price with the seller, be sure to account for the amount it will cost your to pay the taxes, including penalties, fees, and all associated costs.
In Texas, I have had the attorneys representing the state be very slow to notify the state when the delinquent account has been settled. Years of delay. In the mean time, the attorney expected to be paid for the ongoing time and attorney fees. Heads up.
If the tax attorney to whom you referred was an attorney that you hired, this person may be an excellent source for how to acquire the property and structure the purchase agreement.
Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
13y
Adam has made an excellent suggestion.
While in order for such a lien to be legally enforceable, it must be of record and recorded in the county public records, it is a good idea to make sure such obligations are addressed. If nothing else, you are beginning on the right foot with the HOA (should one exist). More of a public relations issue with the HOA and community.
Salt Lake City, UT · Member since 2013 · 10 posts · 0 votes
13y
I suppose the type of purchase you set up would depend on your end goal. Seems like multiple exit strategies are on the table; you could buy this property yourself, wholesale it to someone else, flip it, etc.
Real Estate Investor · Cleveland, OH · Member since 2013 · 173 posts · 18 votes
13y
Or you could get the property under contract for nothing, before you do this, make sure you do your due diligence in checking for liens etc., find end buyer.
Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
13y
Yes Tom u are correct tax suit turned over to lawyer . I talked to them today and they are goin to send me a paid off on both tax suits. Going Monday to check with home onwer to view house. I will check up on who owns property. On taxes paid every year her name is on the list. Thanks for input. I'm currently at the buying summit at Las Vegas so maybe I can run into some of y'all.
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
13y
Jason Patterson
Do your due diligence!
With tax sale properties ALWAYS:
1. Inspect the property, these properties often have major problems that either the owner knows about and is passing problems on to a new buyer, or they don't know about but through neglect or ignorance have heightened.
2. Do a title search to know what other liens, judgments, mortgages, etc could be out there. IRS tax liens are of real concern. Title defects can also be a problem. Some people intentionally let properties go to tax sale that they otherwise could not sell.
3. Know the rules of your specific sale. 50 states have 50 different rules in this case all real estate IS local. What liens if any are wiped out? Is there a redemption period? etc.
4. Obviously, know local values.
If you have done all the above and things are clean and to your liking, then proceeding to purchase the property before the sale will eliminate all you competition, unless they have also contacted the seller.
Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
13y
Thanks for all the input. Yes,Im aware of all the due diligence. This house is not in the auction stage as of now. I'm dealing straight with home owner and lawyers handling the tax suit. Just needed know if anyone has paid off delinquent taxes for someone and ended up with the property. This is the deal that im working on since home owner wants nothibg to do with house anymore. Monday when I get back home ill be able to start doing all the dealing and property inspections. I guess my big question is should I get a lawyer to write up a contract since i will be paying off taxes and wouldn't want the lady to say " alright thanks for paying off my taxes" now I want 50k for the property. U know what I mean?
Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
13y
YES. Hire an experience real estate attorney. Extremely cheap security blanket. This is a very complex transaction. Please keep in mind my several bad experiences with the attorneys representing the state of Texas not following through.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Exactly, have an attorney/title co. handle it. Get a purchase contract. Your contract can be for $30,100 with the seller delivering clear title, or for $100 and subject to existing liens. The first one is safer, but get a title search/insurance in either case. You Don't pay any taxes until, or after, the deed transfer.
Specialist · Grand Rapids and Kalamazoo, MI · Member since 2013 · 391 posts · 116 votes
13y
There is good advice here.
I have purchased a home for delinquent taxes (plus a smaller moving fee on top of it). However, it was before the auction process, so the mechanics were different. In my case, the homeowner found me 3 days before the final due date of her back taxes, and we were able to pull together a closing before it got there.
We had everything included on the HUD, including the taxes and the amount I paid to the seller. This was relatively easy, and the title company did very quick work to pull it together. So I know it can be done. However, once it's in the auction process, you may be dealing with a different animal... a good RE attorney should have your answers.
Originally posted by Jason Patterson:
Thanks for all the input. Yes,Im aware of all the due diligence. This house is not in the auction stage as of now. I'm dealing straight with home owner and lawyers handling the tax suit. Just needed know if anyone has paid off delinquent taxes for someone and ended up with the property. This is the deal that im working on since home owner wants nothibg to do with house anymore. Monday when I get back home ill be able to start doing all the dealing and property inspections. I guess my big question is should I get a lawyer to write up a contract since i will be paying off taxes and wouldn't want the lady to say " alright thanks for paying off my taxes" now I want 50k for the property. U know what I mean?
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
13y
Jason Patterson
Yes just did one about a month ago, sale coming up in a few months, the owner wasn't paying the taxes and was intentionally letting the property go. He said the *&^%# taxes were too high.
I did give him some money and he did bring the taxes up to date before the sale. And then he handed me the new deed.
Real Estate Investor · Plano, TX · Member since 2011 · 30 posts · 25 votes
13y
There's nothing special with this type of closing. Your seller has a lien and/or judgment against the property. Get it under contract and let the title company do their due-diligence. They will pay off the tax debt as part of the closing. You pay the seller via the title company and the title company uses the seller's money to pay the seller's obligations. There is no reason to pay anything outside of closing.
Your only variable is that you won't know your final costs until the title work is complete, as they might find other surprises (liens, etc) that the seller would normally worry about paying.
Congratulations. It sounds like a great deal. I hope it's papered up already!
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
13y
Brian Pellerin
Tax Sales are like none other, it truly is buyer beware.
In one case the seller was imprisoned for arson, guess what he burnt down? Chapter 90
In another case, husband went out west to seek employment, he was a carpenter. Plan was he would get a job, send money and wife and family would join him. They never heard from him again, so the wife packed the 3 kids and everything else they could fit in the car and went looking for her long lost husband. Left house with everything else in it including food in the frig. Chapter 16
Another case, owner died in 1915 with no heirs, no will, no deed transfer. Girl friend started paying the taxes, and two more generations of her family paid the taxes for the next 85 years. Then somebody wanted to buy the property for a subdivision. The buyer's attorney did a preliminary title search and told his client that the "sellers" did not own the property, which they didn't. The "sellers" attorney also did another title search and told his clients the "seller" that "There's nothing that you can do." so they stopped paying the taxes after 85 years and let the property go to tax sale on the advise of two real estate attorneys. Chapter 72
In yet another case there were two identical 18 acre adjoining tracts owned by various members of the same family over many years. There were SIX unrecorded deeds in a row on the subject property. With the confusion over the two identical tracts and the SIX unrecorded deeds in a row, the owner decided to stop paying the taxes and abandon the property. Chapter 89
In another case a hoarder passed away leaving two houses on the same property filled to the brim. There was a walking path through the rooms with plastic milk jugs crushed from walking on them. the crushed stuff was 2 feet thick. The rest of the rooms were packed to the ceiling. The attorney for the estate/deceased filed a estate tax return stating that the property had ZERO value and therefore was no subject to either state or Federal inheritance/estate taxes. There were 6 heirs. Chapter 100
I could go on, but won't. The uniqueness of many tax sale properties, I have never seen in non-taxsales.
Real Estate Investor · Plano, TX · Member since 2011 · 30 posts · 25 votes
13y
David Krulac I'm in full agreement with you on tax sales! Novices should steer clear!
However, I believe that Jason Patterson highlighted a scenario that is pre-tax sale. In this case, just pay the creditor and move forward.
Jason, this thread says two things. If you are dealing with a tax sale, get professional help. Do not try it alone.
If you are dealing with a homeowner about to lose their house in a tax sale, proceed with reasonable due-diligence and close in advance of the scheduled tax sale, if any.
Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
13y
Originally posted by Brian Pellerin:
David Krulac I'm in full agreement with you on tax sales! Novices should steer clear!
However, I believe that Jason Patterson highlighted a scenario that is pre-tax sale. In this case, just pay the creditor and move forward.
Jason, this thread says two things. If you are dealing with a tax sale, get professional help. Do not try it alone.
If you are dealing with a homeowner about to lose their house in a tax sale, proceed with reasonable due-diligence and close in advance of the scheduled tax sale, if any.
Yes, I agree. I will get title company and talk to a lawyer on Monday. Stuck in Vegas this weekend for The Buying Summit. So I'm ready to get back home and get to working on it. :) I've been to county tax sales before and there are some good deals and some that I wouldn't touch.
Real Estate Investor · Plano, TX · Member since 2011 · 30 posts · 25 votes
13y
Jason Patterson Can you clarify your question? Is your deal a tax sale or not?
BTW, if it helps, I'm closing on a house next week that has $40K in taxes due. It's just a private sale. And I'm going to meet with a seller tomorrow on a house that owes $5K in taxes. These taxes are motivations to sell, especially the $40K which is climbing at an alarming rate.
Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
13y
Originally posted by Brian Pellerin:
Jason Patterson Can you clarify your question? Is your deal a tax sale or not?
BTW, if it helps, I'm closing on a house next week that has $40K in taxes due. It's just a private sale. And I'm going to meet with a seller tomorrow on a house that owes $5K in taxes. These taxes are motivations to sell, especially the $40K which is climbing at an alarming rate.
It's a private sell just like yours Brian. Almost same amount mine is 32k in legal fees and taxes owed. Send me a message with your number and ill give u a call if that's ok.
Real Estate Investor · Deer Park, TX · Member since 2013 · 24 posts · 0 votes
13y
Just got back from county clerks office it's a quit claim deed and she is the grantee of the property. She also told me the property has been paid of for years. What type if contract should I write up to take to a title company ? I want a 10/14 day inspection include also right? She can't find the keys to get into house so getting in to view repairs will be difficult. I contacted a lawyer for legal advice and waiting on his return phone call. In the meantime what type of contract should I write up. This will be my first deal and so far it's looking good.
Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
13y
Jason Patterson, a simple 1-page purchase contract with purchase price being the real estate taxes due plus closing costs. Make the purchase contract contingent to the following:
1. Clear title, no liens or encumbrances other than the taxes due
2. Satisfactory inspection of the physical condition of the property
Then involve an attorney or title company (whichever works for your state.