How to legally solve this challenge

5 Replies

I am looking for ideas and opinions (not legal advice of course) from BP colleagues that might help me an approach (for which I’d consult a lawyer) to solving a challenge.

I am new to real estate investing in Real Estate. I live west of Houston and have begun seeking to buy vacant land / lots with past due property taxes which have not yet gone to tax sale.

In a couple instances, I ran into this situation:

    -Have an owner who is a willing seller

    -Past due taxes are a relatively large

    -Too few comps to ascertain resell value with enough certainty to ensure a profit

I am looking for an approach that would allow me to legally market the property for the owner and split the profit with the owner if I am able to locate a buyer at a price sufficiently high for the owner, and me, to be satisfied.

In these instances, the magnitude of taxes due has increased the risk of finding a buyer willing to pay enough to make a profit if I were to buy the property outright from the past-due owner and resell.

I have contemplated a couple possible approaches:

    1) A purchase option with the past-due owner for a period of time during which I would market the property. I’ve seen articles and heard podcast that suggest this would give me an equitable interest in the property and enable me to legally market it (without a real estate license) and then do a double close

    2) Secure a special power of attorney from the owner granting me the authority act on their behalf to market the property for a defined period of time and receive a portion of the profit from any sale at closing.

Any thoughts on either of these approaches or any other approaches that would might be legal / illegal, particularly in Texas?

I don't think #2 works because you would be acting as an unlicensed broker. Getting "permission" from the buyer doesn't solve the problem. #1 should work but is not a great deal for the seller. You aren't really giving them anything other than trying to do what they could do on their own: sell the property to a 3rd party. Typical tax sale timeframes are too short for traditional marketing. Your value add in this type is paying cash.

The simple answer is to become a licensed real estate agent, but I don't think you were looking for that answer.

I would go with a purchase option. While using a power of attorney has some advantages, there are a lot of rules about fiduciary responsibility and a few reasons I would avoid that if you can.

Wow, three great comments in a row, only thing I can add is stop reading guru stuff looking for ways around conventional thinking and methods :)

Might ask some Realtors what land is selling for, watch the MLS and see what listings run, that will give you a good indication of an asking price and shouldn't be far off market value. Attend some auctions and keep your hands in your pockets, LOL.

Remember too, if you take an option to wholesale a deal, you don't "offer" the property for sale, you're selling an option, there is a difference and TREC may have an issue with that. I agree with Adam, running around using a special power of attorney will likely get you nailed. And Jerry is saying, I believe, that you owe a duty to that seller to get the highest price you can for them, not yourself as their attorney-in-fact.

So, that leaves Steve's suggestion, get a license, list land, specialize in that niche if you like and charge 10% commissions.

If you want more, buy it and speculate, just know you can hold raw land a loooong time before a buyer rides up. BTW, always ask the neighbors if they are interested in buying it! Good luck :)

Doesn't matter if a property has tax defaults. There's either equity or there isn't. If the property has equity, and if you can negotiate a good deal with the seller AND if you think you could find a buyer for more, tie it up with a straight option. Negotiate the best price, lowest consideration and longest terms you can with the seller. You would be selling your option, not the property You would be marketing your option, not the property. Act, think and speak like a principal in the deal.

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