Can I get my money back after tax deed auction?

52 Replies

I bought a land at a County tax deed auction. I did my due diligence and both the city zoning website and the zoning expert at the City said it is residential.

I won the auction....excited....and then another zoning expert at the City said it is Open Land. I confirmed with a higher person at the City is it Open Land.

Is there ANY chance I could get my money back form the County as I was misinformed? Any suggestion on how to proceed? This is a nightmare...

IMO, no matter who you talked to, or who told you what, it's buyer beware at CA tax sale. The fact that the city "zoning expert" didn't know what two other employees knew is troubling. But this kind of thing happens to developers and builders all the time.

The county sold you the land, not the city, so I'm not sure how you have a case that the county should refund your money. I've never heard of anyone in CA getting a refund because they were misinformed or because the land use turned out to be different.

You should definitely try though. Get the city zoning expert to put something in writing that says he gave out misinformation. Get the county assessor to admit that its land use description is incorrect. Then get the tax collector to agree that it's disclaimers do not apply to you and overturn the sale. If that doesn't work, then sue the city and county.

How much did you pay for the property? If you can't re-sell it, then you can wait out 5 years of nonpayment of taxes until it goes to tax sale again.

A proper DD would have included looking at the maps to ascertain the zoning as opposed to relying on word of mouth. Have you considered a zone change, or selling it at a profit rather than try going back to the county. I purchased a tax deed for $20K which had a house on it. Once I started making enquiries the sale got rescinded. I would have like to fight it but I wanted to keep a good relationship with the LA county so I let it slide.

Marie: It was 62K.

Annunciata: the zoning map on their site shows it is residential (and it still does). But the general plan says different. That's why I went to the city to verify with a zoning expert who told me it is residential. I assumed she knew the general plan, but obviously she didn't.

A rezoning application is $15K, and I was told there would be very little chance it happens because the neighbors would fight it like hell, and the city officials are also elected by them.

There is a chance to rezone it....but it would have to be with by the person who has architect plans and wants to live there. I bought it just to flip it. Now I am stuck with it. I am trying to sell it with an agent without success. Any other ideas to sell it: **********? eBay? Other?

Originally posted by @Marc Dufour :
Marie: It was 62K.

Annunciata: the zoning map on their site shows it is residential (and it still does). But the general plan says different. That's why I went to the city to verify with a zoning expert who told me it is residential. I assumed she knew the general plan, but obviously she didn't.

A rezoning application is $15K, and I was told there would be very little chance it happens because the neighbors would fight it like hell, and the city officials are also elected by them.

There is a chance to rezone it....but it would have to be with by the person who has architect plans and wants to live there. I bought it just to flip it. Now I am stuck with it. I am trying to sell it with an agent without success. Any other ideas to sell it: **********? eBay? Other?

What price are you trying to sell it for? If it were me I'd price it so I could get out of it. The buyer will have a known challenge to build on it. There's only so many buyers for that. There's a reason the property went to tax sale. I might also try to get a down payment and carry back the rest.

In this case I would agree with Marie Poe and seek redress based on the misinformation. Either seek your money back or at least demonstrate the cost of their error $15K plus architects fee without any gaurantee of a zone change. One thing you/they could consider is how much taxes were owing. So if the taxes were $30K but bids put the price to $62K I think it is only fair they consider at least compensating you for their error out of the profits. Loopnet and Redfin are also good sales outlets if your agent is not already using them.

The tax owned on it were $2.5K only...!!! So they made a lot of profit...but they are giving it back to the previous owner right?

What's special about loopnet and redfin vs. zillow/trulia/etc. to sell the land?

Marc, Sorry to hear of your troubles, but you will fight an uphill battle trying to void the sale. This is the wild west and these CA Counties are notorious for errors. In Sacramento this year, several of the parcels on the lists auctioned as Land WITH Structures, but in fact, were just vacant lots. That blunder is a little more obvious than in your situation, but my point is, they do screw up alot and sometimes, you can't even rely on the counties own records!

Marie is right, you need to price it to sell. Even if you lose a couple bucks, it may make sense to make this nightmare go away. I'm assuming you can get marketable title on these properties right?

There are companies that will buy land at 40%to 50% of fair market value and most of them usually purport to close within 7 days after the offer is accepted. Google "cash for land" and you should find a few. You can also email Lindsey at groundedproperties. I've worked with her before. I agree it's bottom barrell, but it's an exit.

It sounds crazy, but If it worth some money I would do a secured loan or LOC under an LLC or a CORP. That is if a bank will give you one. It wont show up on your personal credit and it will give you some immediate cashflow so you can jump into another deal and recoup your losses. You can still pursue litigitation in the meantime and hope to get your money back.

Last but not least, you can wait 5 years let the County Cons take it back and when the next unsuspecting tax investor becomes the victim, you can reap the Tax Overage. And the cycle continues...You might even make money

Seems like you paid significantly over the market value for the property. There really is no harm in trying especially if "the zoning map on their site shows it is residential (and it still does)" You have clear proof of the documents you relied upon and unless there is a disclaimer on the zoning map, their error has caused you a quantifiable loss. If they are able to rescind a contract in favour of a home owner based on their error they should be able to rescind this if you push them hard enough with alot visits. I never rule out any possibilities. You can get anything you want if you put your mind to it.

@Marc Dufour

I've said it many times and have written it here before.

Tax sales are the MOST HAZARDOUS type of real estate purchase that there is.

There are no do overs.

There are no seller disclosures

There are no home inspections

Most times you can only look at the exterior and can't see the interior.

There are lots of mistakes made, even in title searches.

Many properties that are sold at tax sale are being purposely abandoned by the owner because they CAN'T SELL IT!

I've seen on the tax sale list and people bought them:

side of a cliff

land at bottom of man made lake

land on Army bombing range

House torn down in 1972 on lease land, only the house was for sale

land under railroad tracks

sliver of land too small to do anything with

environmental problems even super fund site, if you don't know what the super fund is look it up, its not good and certainly not super.

house with back wall missing

land fill

former gas station

former dry cleaners

former auto repair garage

properties with millions of IRS liens

swamp & wet lands

flood way property unbuildable

landlocked property with no access

lot in subdivision never approved by authorities

properties with multiple tax sales (title uninsurable) in the chain of title

properties where the owner was claiming adverse possession but never filed court documents

meth house

property claimed by more than one owner

gun toting neighbor gated the tax sale property claiming it was his (I say never argue with a man carrying a gun)

basement filled with water for last several years

20 year paid up land lease, you would own the land but not get any rent for the next 20 years because tenant pre paid to former owner (commercial property)

CATV antenna tower land lease, tower was already torn down and land was owned by somebody else.

Property vacant for 7 years with bad leaking roof

Property vacant for 7 years covered with poison ivy

Property vacant for many years now home to many snakes (think snakes in the plane)

Non existent property

Properties with more than one chain of title and separate owners who don't know about each other.

Properties with endangered species

Properties with historic or anthropology significance

Properties with failed perk tests

Properties with failed septics and wells

Other than that tax sales are a piece of cake.

Tax sales are like the wild west, it is buyer beware with no safety net!

You have 2 chances to get your money refunded, slim and none.

I love buying tax deed sales but I also love playing poker. Tax deed sales involve risk and a little bit of an informed gamble. You really have to know what you're doing and do as much research and have enough experience to know when the deal is right and the risk is worth the price. I know here in FL there is zero chance that you would your money back. If the general plan says the zoning is open space and the website says residential that's one I personally would have scratched form my bid list, especially at that price. Maybe take a shot on it if it goes for the back taxes but beyond that you're taking a gamble because you can't go by what some city employee says unless you have it in writing from a city planner or someone that's in power to make those decisions.

I think your best play at this point may be to try to sell it to one of the neighbors and maybe you can get your money back. I'd try to play a little hardball and let them know you will be building there but you're willing to give them first opportunity to purchase the land to expand their lot.

As @David Krulac said there are a lot of pitfalls that people ignore when bidding. Many of those are title issues which can be corrected with a quiet title action while others mean the property is often more of a liability than an asset. Unfortunately in many of my auctions I run into amateur bidders that bid the properties up to the same price they'd sell for if they were on MLS taking away any benefit from my informed gamble so I let those pass.

@Marc Dufour

In the decades, that I have been doing tax sale there was one case where the sale was voided.

There was a severe environmental problem that the bidder discovered after the sale. He did not want to take title, even hired an attorney to help negotiate with the county tax people. The did recind the sale, but they kept his money and didn't give him the deed. all parties were happy with the settlement.

As @Patrick L.

says maybe sell to a neighbor OR sell to the other bidders at the ta sale, maybe the second bidder would be interested.

Was this tax deed auction in a county that first sells a tax lien certificate? You have to wonder why the certificate holder didn't win the tax deed auction ... or maybe the certificate holder actually won by not bidding on the tax deed ...

Originally posted by @Annunciata R. :
Seems like you paid significantly over the market value for the property. There really is no harm in trying especially if "the zoning map on their site shows it is residential (and it still does)" You have clear proof of the documents you relied upon and unless there is a disclaimer on the zoning map, their error has caused you a quantifiable loss. If they are able to rescind a contract in favour of a home owner based on their error they should be able to rescind this if you push them hard enough with alot visits. I never rule out any possibilities. You can get anything you want if you put your mind to it.

The CA county websites and bid four assets have disclaimers that make it very clear that the county is not responsible for any misinformation regarding property use, including their own misinformation. They say they believe their info to be accurate but not to rely on it.

The only thing that overturns a CA tax deed sale is a sale that was held in error. For example if the taxes were paid, or if there was a BK filing, or if noticing was improper.

My advice to the OP above is tongue-in-cheek. IMO they'll never rescind this sale.

Originally posted by @Steve Babiak :
Was this tax deed auction in a county that first sells a tax lien certificate? You have to wonder why the certificate holder didn't win the tax deed auction ... or maybe the certificate holder actually won by not bidding on the tax deed ...

No tax certs is CA.

Thank you for the advices.

To summarize...it will be challenging but the suggestions are:

1 - Contact the County Treasurer to get my money back, least the profit they made (unlikely), claiming the information was incorrect.

2 - Try to sell to the neighbor at discount.

3 - Get a LOC on the land to invest elsewhere. Is it possible to get HELOC from land?

4 - Have my realtor try to sell it at discount.

5 - Contact "cash-for-land" companies...but I guess unlikely to get $62K with them?

Any other ideas?

Originally posted by @Marc Dufour :
Thank you for the advices.

To summarize...it will be challenging but the suggestions are:

1 - Contact the County Treasurer to get my money back, least the profit they made (unlikely), claiming the information was incorrect.

2 - Try to sell to the neighbor at discount.

3 - Get a LOC on the land to invest elsewhere. Is it possible to get HELOC from land?

4 - Have my realtor try to sell it at discount.

5 - Contact "cash-for-land" companies...but I guess unlikely to get $62K with them?

Any other ideas?

1. Probably zero chance of that happening.

2. I still think that's your best bet.

3. It's unlikely you'll get a loan on this land. It's hard to get anything other than short term credit on vacant land and with its current zoning it's not going to appraise for much. Most banks only want to lend on a lot purchase as a short term solution until you're able to build on it.

4. Now that your buyers are in a traditional sale setting and not a an auction they will have time to do their due diligence and odds are they will figure out the land is not as valuable as they thought.

5. Same as number 4, without the proper zoning they probably don't want it.

I'd look more into the process of having it rezoned because if you can't rezone it you own land with almost no value whether you sell it, keep it or try to borrow against it. That is probably the same reason the previous owner let it go. My guess is even if you can you'd probably need a variance from the neighbors which you probably wouldn't get without some type of concession. If that's not feasible then the land isn't worth more to anybody else than it is to those who own the adjacent parcels. If I could double the size of my lot and fence it in that would have some real value to me even if I couldn't build on the second part of that lot.

Can I put a fence on an lot zoned "open land"?

The neighborhood is VERY conservative. That might get them so mad they would collectively try to buy it...?

Originally posted by @Marc Dufour :
The tax owned on it were $2.5K only...!!! So they made a lot of profit...but they are giving it back to the previous owner right?

The overage is not a "profit" it's just an overage, the county will not profit from it. After all the back taxes, interest, fees and expenses are deducted then the money will be distributed first to the lien holders in order of the priority of the lien and then after a year any remaining money unclaimed by the lien holders will go back to the previous owner of the property.

http://www.sco.ca.gov/ardtax_ctcrefman_8510-8517.html

Originally posted by @Marc Dufour :
Can I put a fence on an lot zoned "open land"?

The neighborhood is VERY conservative. That might get them so mad they would collectively try to buy it...?

You'd have to check your local zoning laws to see exactly what that designation means and what the restrictions would be. I don't know if it's meant to be common area for the neighborhood or if it just means you can't build a structure on it.

How long did the previous owner own the property for and how much was the last sale price? I'm just trying to figure out if anybody thought it was valuable before you bought it.

How about the idea of pushing the neighbors to buy it is I can create an area they don't like.....for example putting a fence with a donkey on it? (seriously!)

There is No justification for the county giving you any money back...forget it. Immediately call the 2nd high bidder, that'll be your best shot...hoping he hasn't learned what you've learned yet.