Contractor · Member since 2021 · 5 posts · 4 votes
A family member approached me about selling their paid off home to cover unpaid property taxes, 6 years to be exact. They were served papers a little over 4 weeks ago. According to the law office that's handling the suit they have about 10-12 months until foreclosure efforts begin.
My plan is to Seller Finance the home for 4 months to complete the rehab out of pocket then refinance it with a bank for a rental.
I'm looking for any advice on proceeding with this and if I'm going about it the right way. Do I need to give them our agreed upon selling price and let them pay the taxes or are the taxes paid at title on the closing date before the home is funded? Do I need to offer them the agreed upon price minus the property tax bill and I cover the owed taxes?
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
1y
If they got served it is possible 10-12 months, but it could be much faster, like 1-2 months. Every county is different, every circumstance different, could even depend on how often the county has sales. Some every month and some every quarter and some just one time a year. I would not count on that 10-12 month figure.
With that in mind, if you want to buy it, you can buy it now, pay off the taxes, and they can owner finance the balance of the purchase price. Sounds like you may be the one that has to pay the taxes at closing and your contract can reflect that, as well as any other closing cost if they don't have any money. That will include title insurance, escrow fees, etc.
You should probably have an attorney at a title company help you write the contract so that everything gets covered.
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
1y
If they got served it is possible 10-12 months, but it could be much faster, like 1-2 months. Every county is different, every circumstance different, could even depend on how often the county has sales. Some every month and some every quarter and some just one time a year. I would not count on that 10-12 month figure.
With that in mind, if you want to buy it, you can buy it now, pay off the taxes, and they can owner finance the balance of the purchase price. Sounds like you may be the one that has to pay the taxes at closing and your contract can reflect that, as well as any other closing cost if they don't have any money. That will include title insurance, escrow fees, etc.
You should probably have an attorney at a title company help you write the contract so that everything gets covered.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
1y
The contract you write should specify how and when the taxes are paid. Usually they are just paid at closing. However I have completed tax foreclosures before a sale was completed. You might want to pay off the tax sale and use wording in your contract to protect you.
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
1y
Like the others said, get a professional involved who understands this particular process. It varies heavily by state and even by county. This is also assuming that the liens are actually for property taxes and not for tax liens from the state, IRS, or some other entity. The last thing you want to do is put a ton of time and money into the house only for it to be seized/foreclosed on anyways.
I would also have a discussion with your lender up front before getting started. Not clearing the liens at "purchase" with seller financing could lead to a situation with the lender refusing to refi until the tax liens are paid. There are tricky rules when it comes to using refinance funds to pay off delinquent tax debts. I havent read up on this particular scenario in a while, but it's worth digging into beforehand to prevent a mess.