Tax Deed OTC - is assigning to buyer/wholesale possible?
New to Real Estate 路 AL 路 Member since 2022 路 4 posts 路 3 votes
Tax Deed OTC - is assigning to buyer/wholesale possible?
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JD, CCIM , Real Estate Broker 路 Tuscaloosa, AL 路 Member since 2014 路 1k+ posts 路 1k+ votes
3yYes, you can sign a contract to sell property or rights you do not yet own. Outside the tax sales area, this is common with options, or even just flipping real estate purchase contracts.
You need to have an "out" in case you are not able to purchase the tax rights within a certain time period. It does not have to be done through a closing attorney, but an attorney will have to prepare the deed. Usually there is a $50 to $75 charge for that. If the buyer or the seller is an individual (not an LLC or similar) the party that is an individual can prepare the deed. In Alabama, the deed must say the name and address of the preparer. In Tuscaloosa county, the deed must include the Source of Title. Maybe other counties are similar. I know Jefferson does not require it. There is also a required from that includes information about the transaction. Look up almost any deed filed after 2019 or so, and you'll see the form. You can include the same information in the body of the deed, but most people use the form. If the seller is married or single, you have to say that. If it is a local or out of state entity, you have to say that. (Example: Alpha LLC, an Alabama limited liability company or Bravo, Inc., a Delaware corporation)
Buying over the counter from Alabama Department of Revenue can take a long time. Once you receive a quote, you have 10 days to complete your purchase. Because of wholesaler activity, and people asking for quotes on 5 - 10 different days in a row (extending the effective time period to 50 to 100 days) there is a tremendous backlog in some counties. I have heard of people interested in Jefferson County properties being told they will not get a quote for 4 or 5 years because of that.
Redemption rights in Alabama are exceptionally complicated. Not that difficult once an expert explains them, but it takes a while to explain. And, you have to be able to remember a large number of moving parts to know the answer in any particular situation. There are a lot of so-called experts spouting stuff that is completely wrong because they never completely understood it the first time somebody knowledgeable explained it to them. Or, they never talked to anyone knowledgeable, but just picked up advice for investors who have been lucky, not educated.
Do your homework!
5 Replies
- Investor 路 VA 路 Member since 2015 路 21k+ posts 路 19k+ votes3y
@Brian Young
Typically a contract states you own or control the asset - since you do not I don鈥檛 believe it would be valid and if you were seeking it and someone else then bought it you could be sued.
Talk to an attorney is my recommendation
7e investments53 Reviews - New to Real Estate 路 AL 路 Member since 2022 路 4 posts 路 3 votes3y
Quote from @Chris Seveney:
@Brian Young
Typically a contract states you own or control the asset - since you do not I don鈥檛 believe it would be valid and if you were seeking it and someone else then bought it you could be sued.
Talk to an attorney is my recommendation
Thank you for taking the time to provide your insight Chris!
Agreed, my first impression was this shouldn't be possible and could be dangerous. But since having heard it been done once recently I've been curious.
Unfortunately with the Holidays this is the worst time to speak with professionals about these matters! I always tend to get spurts of motivation at the wrong times 馃槄.
- Real Estate Broker 路 Coppell, TX 路 Member since 2011 路 5k+ posts 路 4k+ votes3y
@Denise Evans is your AL state expert here on BP....so you might look her up and contact her.
For the most part I'm thinking NO....of course I don't know anything about AL tax sales. Maybe not impossible, but maybe not probable and not worth your effort.
If you're trying to get them to a wholesaler and then 2-3 people make a profit on them, I don't think there's usually you're going to get a good enough price for that to happen.
Plus you probably have a very small market of people who want/understand/invest in tax deeds...now you limit that even further to people you want to flip them to...so that market is pretty thin. Then you think about what kinds of properties are sold and that limits it even further.
Not sure how AL works, but once you get a deed, is there a redeemable time limit where the previous owner can repurchase? If so that limits probably what people are probably willing to risk on the purchase price...and maybe willing to risk at all. Also I say the idea of tax liens/deeds is simple, but it is not easy. It's real work. It's maybe a get wealthy slowly business typically, and I think for 98% of the investors not a get rich quick business. The margins typically are pretty thin in most places, so for all the work and all the risk, to then try to flip these I can't imagine is a very good business model....but would be fantastic if you prove me wrong. I mean if you can buy for $600 and sell for $660 two months later, what that is 60% ROI a year is what some people might pitch you...sounds awesome, but there's a fair amount of work to do that and even more work if you could resell, so maybe not worth your time. I don't think you'll find stuff for $600 that you could resell for $6000 or $60,000 very often. Just too much competition for that.
Are you looking for theoretical answers about trying to flip tax deeds?....like is it possible?
or do you have something already that you need to get rid of....if you're going to sell at a loss and you got a decent deal, maybe someone would take that chance.
Denise has had meetups in the past so you might try to get with her on a meetup and see what she thinks. I don't know her personally, never been to a class with her or anything like that, but from the answers I've seen her give, I think she is probably someone you can trust to point you in the right direction and keep you out of trouble and perhaps keep you from wasting your money.
Good luck...best wishes...let us know how it goes.
- New to Real Estate 路 AL 路 Member since 2022 路 4 posts 路 3 votes3y
Quote from @Bruce Lynn:
@Denise Evans is your AL state expert here on BP....so you might look her up and contact her.
For the most part I'm thinking NO....of course I don't know anything about AL tax sales. Maybe not impossible, but maybe not probable and not worth your effort.
Thank you for the recommendation Bruce! I'm quite new to this but I do understand AL Tax Deeds are a bit different than many other States.
After the holidays I definitely intend to reach out to more people to make sure I'm in the clear.
My research and investigation has led me to a number of properties that are out of the redemption stage for the original owner and have been vacant for years, but reside in subdivisions that land has sold for quite a bit more than the value of the property. I don't have the funds to lock up all these deeds myself so I wanted to make use of them while I had exclusive bidding rights for 2 weeks as is law here.
- JD, CCIM , Real Estate Broker 路 Tuscaloosa, AL 路 Member since 2014 路 1k+ posts 路 1k+ votes3y
Yes, you can sign a contract to sell property or rights you do not yet own. Outside the tax sales area, this is common with options, or even just flipping real estate purchase contracts.
You need to have an "out" in case you are not able to purchase the tax rights within a certain time period. It does not have to be done through a closing attorney, but an attorney will have to prepare the deed. Usually there is a $50 to $75 charge for that. If the buyer or the seller is an individual (not an LLC or similar) the party that is an individual can prepare the deed. In Alabama, the deed must say the name and address of the preparer. In Tuscaloosa county, the deed must include the Source of Title. Maybe other counties are similar. I know Jefferson does not require it. There is also a required from that includes information about the transaction. Look up almost any deed filed after 2019 or so, and you'll see the form. You can include the same information in the body of the deed, but most people use the form. If the seller is married or single, you have to say that. If it is a local or out of state entity, you have to say that. (Example: Alpha LLC, an Alabama limited liability company or Bravo, Inc., a Delaware corporation)
Buying over the counter from Alabama Department of Revenue can take a long time. Once you receive a quote, you have 10 days to complete your purchase. Because of wholesaler activity, and people asking for quotes on 5 - 10 different days in a row (extending the effective time period to 50 to 100 days) there is a tremendous backlog in some counties. I have heard of people interested in Jefferson County properties being told they will not get a quote for 4 or 5 years because of that.
Redemption rights in Alabama are exceptionally complicated. Not that difficult once an expert explains them, but it takes a while to explain. And, you have to be able to remember a large number of moving parts to know the answer in any particular situation. There are a lot of so-called experts spouting stuff that is completely wrong because they never completely understood it the first time somebody knowledgeable explained it to them. Or, they never talked to anyone knowledgeable, but just picked up advice for investors who have been lucky, not educated.
Do your homework!
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