New Orleans Adjudicated Property Auction Questions

12 Replies

Hey everyone, I am a real estate agent in New Orleans, but I am relatively new to the investing side of things, so I am hoping that someone can help me understand this particular topic a bit better...

I am looking to invest in adjudicated properties in New Orleans through CivicSource, which I understand is supposed to be safer than investing in tax certificates or liens, since the adjudicated properties are advertised as being sold with clear title and title insurance.

I've read quite a few negative articles from around the time the city starting using CivicSource back in 2015, so I'm wondering if anyone has any recent positive experience with this type of investing? Are adjudicated property investments really as "safe" as CivicSource and the city advertise them to be?

Any input is greatly appreciated!

One of my attorneys does the due diligence and title insurance examination for Civicsource. IIRC civic source is self insuring the title on these properties, but the vetting meets the best practice requirements for ALTA.

Hey @Cory Cheramie . I know several investors and builders that have had nothing but issues with properties bought through CivicSource. Everyone I know says to stay away from them. Yes, they claim the properties will have clear title but it seems it doesn't work out that way in actuality. 

Hey @Braden Smith , thanks for the input. Like I said, almost all of the feedback I've heard about Civicsource is negative, so that's pretty telling. Since I'm new to real estate investing, I liked the idea of adjudicated property investing because it would allow me to start small, with limited funds. But it seems I may need to explore other options...

Also, as a side note, I really enjoy reading your posts - you seem to have extensive knowledge on the local market here, and I've learned quite a bit from your contributions on BP and the "New Orleans Metro Realtor Mastermind" Facebook page. My wife and I are both new agents (we just started with the family business, based in Belle Chasse), so we appreciate the opportunity to get an experienced perspective like yours!

@Cory Cheramie I only know one (1) person that purchased and NOLA adjudicated property.  This main issue as it was described to me was that you can only get title insurance up to your purchase price, and any subsequent buyer is limited to that original purchase price.  After 10-15 years, that will not be an issue.  So if the plan is to buy and hold, maybe not an issue, but to buy and build/rebuild and they plan on selling is a big issue as you cant get adequate title insurance.  

I have looked into them, but only because I buy/build and hold with no plans on selling.


@Braden Smith I assume that is similar to what you have heard.  

I bought a lot off civic source.com and I will never use again. The lot I had bought was an old gas station and little did I know the tanks are still in the ground! I called up DEQ and they still had liens on the property from contaminated soil samples. I tried to get my $4600.00 back but was not happening. I never did go to closing on it due to the liability of the tanks which still had fuel in them.

My aunt wAs married she had no children with her husband in New Orleans, La. Orleans Parish. Her Husband had 8 children from previous marriage. My aunt and her husband bought a house, he died many years later and did not leave a will. The house Was destroyed in Katrina,my aunt was rescued from it and came to live in Ga. With me. Long story shorter; she signed a will leaving me all her possessions; paid the mortgage with check from the flood insurance before dying. Why doesn't the property in New Orleans belong to me? After the husbands 8 children did succession, myself and all eight of them became owners on the tax records. The 8 has never paid any tax; I bought the 1% tax title certificate from civic source in 2012 and pAid through 2016, now the 8 won't sign to make agreements of any kind or sell their 50%. What can I do? Civic SOURCE, NEW Orleans attorney and no office in city hall knows what to do with a 1% tax certificate so they tell me. Civic Source litature online is not accurate for community property state laws in New Orleans; they say I can confirm the tax title but no lawyer in New Orleans can deny the community property owners their right to the property! If somebody can tell me how to confirm the title and take ownership away from the owners listed on record, I surely would like to know!

Hi @Cory Cheramie , I am relatively new to real estate investing and I'm also interested in acquiring property through CivicSource. I know this thread is old, but I'm curious if you ended up using CivicSource and what your experience was like? Thanks in advance for any info! 

Originally posted by @Cory Cheramie :

Hey everyone, I am a real estate agent in New Orleans, but I am relatively new to the investing side of things, so I am hoping that someone can help me understand this particular topic a bit better...

I am looking to invest in adjudicated properties in New Orleans through CivicSource, which I understand is supposed to be safer than investing in tax certificates or liens, since the adjudicated properties are advertised as being sold with clear title and title insurance.

I've read quite a few negative articles from around the time the city starting using CivicSource back in 2015, so I'm wondering if anyone has any recent positive experience with this type of investing? Are adjudicated property investments really as "safe" as CivicSource and the city advertise them to be?

Any input is greatly appreciated!


Tax sales and Adjudicated properties are basically two different strategies to acquiring property that the owners failed to pay their taxes. One is not more "safe" per say than the other. In both cases the issues you will face is trying to get title insurance on the property you now own. Without the ability to get title insurance it will be very hard to sell the property.

Property tax sale: You bid on the property, pay the back taxes, interest and penalties and then wait 3 years to see if the owner redeems it. About 95% of the time the property is redeemed and you make a really good rate of return in interest on the money you spent at the tax sale and the taxes you paid each of the following years. If the property is not redeemed in 3 years you sue to quiet title and confirm your tax sale. If you win the suit you receive a judgement, making you the legal owner of the that property.

Adjudicated tax sale: This basically allows you to skip everything I mentioned above about the tax sale process and go right to the part where you take legal ownership of the property. When the property is not bid on at the tax sale, it is adjudicated to the parish. After 5+ years most parishes uses civic source to auction the property off to the highest bidder. Civic source takes care of the noticing and legal process to get judgement on the property (removing the original owner).

I started buying tax sale properties in 2009. I was told that title insurance companies use to write polices on tax sale properties but stopped around that time because of a few lawsuits. They felt the risk was too high for such a small % of their business, it was better to just not deal with it. This made it hard for parishes to market their adjudicated properties. Who wants to buy something without title insurance? Civic source not only provided the platform (online auction) to make it easy to sell the adjudicated properties but they purchased a title insurance company (US National) and self insured the adjudicated sales.

When you get a judgement from your suit to quiet title (tax sales) or by the time you are purchasing adjudicated property from civic source, the property has merchantable title. In both cases a lawsuit has taken place to remove anyone ownership interest that anyone may have previously had on the property. It is recognized by law and recorded. This makes you the legal owner. The problem is with the title insurance companies and whether they will write a policy or not because these types of properties are more risky due to how ownership transferred.

In both (tax sales and adjudicated property) if you are going to get title insurance through US National they do the title exam and make sure that everyone they can find that may have an ownership interest has been notified and if no one responds in the time period required by law, they feel safe issuing a title insurance policy. One of the downsides of using US National, if it is your only option, when the person who buys from you goes to sell it may be their only option for title insurance as well. It's not a large, national, established title insurance company that is commonly used and been around for decades. Make sure that the closing company and bank, if you are getting a mortgage, will be ok with them as the title insurance company. I know title stream and now Bayou Title will write through US National.

Also to note, with signed green cards (establishing the owner received notice of the tax sale) some other title insurance companies will make exceptions and write polices. In some cases you can get the previous owner to sign a quit claim and that will suffice for some companies as well. If you are keeping the property as a rental, after 10 years you can get acquisitive prescription and may make it easier to get title insurance from other companies.

I have bid on several auctions on civic source for the adjudicated properties but never won. The problem I run into is how high these properties are being bid up. They are going for very near or right at current market value. As an investor, there is no benefit to me to pay market value ESPECIALLY on a property that will be a little harder to move because of the limitations on title insurance. From my research looking at comps in the MLS, (in most cases) the US National properties end up selling for about 15-20% less than properties that don't have title insurance limitations.

Property tax sales and Adjudicated properties are a good, necessary process that the local parish governments need. It's often one of the only ways to get a property back into commerce. The parish relies on the tax revenue from property taxes. Most of these properties are run down or vacant lots. Once they are acquired by a buyer they are fixed up or new construction, which increases the tax revenue for the parish. It is also an eye sore for the neighbors and neighborhood, can create a public nuisance or health issue, and often left to the parish to try to maintain at their (tax payers) cost. It can also be a good investment for the buyers. 

If anyone needs any help or has questions about these type of properties feel free to hit me up.  I started purchasing tax sale properties over ten years ago and have done very well with them.  I am a licensed real estate agent and I take care of the title research, value determination and all the pre tax sale work. My good friend and partner is an attorney and he takes care of all the legal side of the process. If anyone needs research done, comps (if you are not an agent) or if you purchased property and need an attorney to quit title we can help you out. 

 

Originally posted by @Kim Ballard :

My aunt wAs married she had no children with her husband in New Orleans, La. Orleans Parish. Her Husband had 8 children from previous marriage. My aunt and her husband bought a house, he died many years later and did not leave a will. The house Was destroyed in Katrina,my aunt was rescued from it and came to live in Ga. With me. Long story shorter; she signed a will leaving me all her possessions; paid the mortgage with check from the flood insurance before dying. Why doesn't the property in New Orleans belong to me? After the husbands 8 children did succession, myself and all eight of them became owners on the tax records. The 8 has never paid any tax; I bought the 1% tax title certificate from civic source in 2012 and pAid through 2016, now the 8 won't sign to make agreements of any kind or sell their 50%. What can I do? Civic SOURCE, NEW Orleans attorney and no office in city hall knows what to do with a 1% tax certificate so they tell me. Civic Source litature online is not accurate for community property state laws in New Orleans; they say I can confirm the tax title but no lawyer in New Orleans can deny the community property owners their right to the property! If somebody can tell me how to confirm the title and take ownership away from the owners listed on record, I surely would like to know!

 You will definitely need to hire an attorney to try to resolve your situation.