Getting blown out in todays tax sale

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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes

Baltimore tax sale is going on as I write this. Getting blown out. Extreme competition in our space. Typically there would be only on or two other bidders on the low end properties. Today we have 4-8 bidders even on all the junk properties.

Most of those properties will not redeem. They will not be able to foreclose because their cost to take the properties is more than they are worth. They will have to walk away from these properties for a total loss.

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Cal C.

Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes

12y

Originally posted by @Ned Carey:

That stinks. Maybe they'll not be back next year after losing their tail this year.

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Cal C.
Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
12y
Originally posted by @Ned Carey:
Baltimore tax sale is going on as I write this. Getting blown out. Extreme competition in our space. Typically there would be only on or two other bidders on the low end properties. Today we have 4-8 bidders even on all the junk properties.

Most of those properties will not redeem. They will not be able to foreclose because their cost to take the properties is more than they are worth. They will have to walk away from these properties for a total loss.

That stinks. Maybe they'll not be back next year after losing their tail this year.
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Patrick L.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
12y
There must have been a guru in town recently pitching a way to "get rich on tax certificates."

I bid at the tax deed auction every month here and some months you see an influx of new bidders paying at least as much as it would sell for if it were on MLS and had clear title and other months there are some great deals. At least with the tax deeds they learn their lesson a lot quicker than the certificates.
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Sid Siddiqui
Real Estate Investor · Bedford, TX · Member since 2014 · 83 posts · 31 votes
12y
@Ned Carey Wow, this totally blows man!
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Account Closed
Investor · Member since 2013 · 15 posts · 5 votes
12y
@Ned CareyI wonder why they are coming out of the woodwork. Do you also invest in DC tax liens?

I've been wondering if this year would see another jump in tax sale attendance. There seems to be less investor activity in the market generally, especially compared to late last year. Those dollars have to go somewhere.
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Justin PiercePro Member
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
12y
Yeah, my understanding is that there are a lot of attorneys that are buying these tax liens because they can charge legal fees.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Ned: what's your take on the new bidders on the low end? Do they not know what they are doing? Or are they buying in volume so the few that do redeem and few that they can foreclose on make the investment worth it?
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y
@Cal C. wrote

The problem is it takes a couple years to foreclose. They won't know their true losses for some time yet. We got money this year from a player that is just realizing now how much his bids from 2 years ago cost him.

@Patrick L. wrote

While that is the case sometimes these are well capitalized people. In at least one case it is a local that should know better. He is bidding on junk he clearly hasn't looked at - a monster risk in Baltimore. However it is clear some of this is hedge fund money coming to town which was expected. What is not expected. is that they are playing in the risky war zones.

@Sid Siddiqui thank for the comment

@Account Closed I do not invest in DC, but have thought about it.

Actually I have experienced more investor activity lately. This is probably why investors that know about tax sale are jumping in.

@Justin Pierce that is normally the case in both MD and DC. I believe this is new hedge fund money.

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Kyara G.
Baltimore, MD · Member since 2012 · 20 posts · 4 votes
12y
@Ned Carey - Have you ever bought from the left over inventory after the auction? We planned on checking that out this year.

It was only a matter of time for the hedge funds - especially with the bigger companies taking a closed look at opening offices here. Which hedge funds are you seeing?
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y
Originally posted by @Account Closed:
Ned: what's your take on the new bidders on the low end? Do they not know what they are doing? Or are they buying in volume so the few that do redeem and few that they can foreclose on make the investment worth it?

I absolutely believe they do not know what they are doing. They don't understand the risks they are taking,

Just like all aspect of Real estate there are hidden costs. I don't think they have not figured those into their cost.. They are bidding in war zones indiscriminately. We bid there because we pick the very best properties in weak areas.
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Justin PiercePro Member
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
12y
Yeah, the hedge funds are certainly a factor across the board. They're putting a lot of money into the market and it's hard to calculate how this is changing the market dynamics.
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Christina R.
Investor · DMV Maryland · Member since 2013 · 867 posts · 370 votes
12y
@Ned Carey - Aw Ned, I'm so sorry to hear this for you. How's Mike taking it?
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y
Originally posted by @Kyara G.:
@Ned Carey - Have you ever bought from the left over inventory after the auction? We planned on checking that out this year.

Absolutely, My very first liens were leftover liens. I have continued to buy them every year. However I suspect there is not much of value left this year.
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y
Originally posted by @Christina R.:
@Ned Carey - Aw Ned, I'm so sorry to hear this for you. How's Mike taking it?

My partner Mike is taking it fine. Our attorney is crying the blues!

You will be crying the blues too. You won none of the liens we bid for you. Saint Benedict went for $45K.

The final results are in. We only won about 2/3 the number of liens as last year. We did spend about the same amount of money because we bought some very expensive liens this year.
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Kevin Ellis
Baltimore, MD · Member since 2014 · 1 post · 0 votes
12y
Hello All,

I'm new to the forum (today) and new to the tax lien sale (this year). Prior to jumping in this year I reviewed the results from the previous two years. I thought I could pick up a property or two at a great rate. I bid on several, albeit with a small budget, and was shocked after the first batch. There were liens amounts at $400 going for $6000. It was really not what I'd expected.

I did end up with 2 certificates, but unlike previous years very few certificates auctioned at the lien price.

I'm glad to see this discussion here that there's maybe someone with big pockets who's being naive. I was beginning to think that someone must have know way more than I did. Maybe they do. Maybe there's some value in buying a certificate at a price that 2X the assessed value.

Ned, thanks for all of your informative post here. They've been quite helpful!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Ned Carey

I think the fundamental issue is that there is so much information just a click away that everyone in the courthouse steps bizz be it foreclosures tax sales etc.. will have to learn to live with this competition...

For us in Oregon we had it pretty good in the FCL bizz up until the trustee's started putting everything on the web.. at that point you had stay at home mothers showing up at the trustee sales with baby in tow and 200k cashiers check :)... Same with tax deed sales in my day of buying them.. the information was posted in the paper and you had to chase everything down then get ready to bid. Now simply go on line to Bid 4 assets and the sales are all on line. this brings in bidders from literally all over the world who have no clue...

And like others I thought well once a few of these investors make bad buys it will go back to normal. ( IE the usual suspects at the sales) but no for everyone that left 3 replaced them... Now in my state Oregon the FCL sales went from trustee to Judicial a few years back.. So that cut out a bunch of competition as you have the right of redemption and HML could not backfill your cash until you go the sheriffs deed six months hence. That created the next little niche of investors running around buying redemption rights.

Just look at all the free education here on BP this creates competition nationwide with those looking to get into this area of investing. I think the competition is here to stay personally.
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y
@Jay Hinrichs I agree that ever increasing competition is here to stay. I also believe it will ebb and flow, all markets do.

The key is to find the opportunities the increased competition brings.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Originally posted by @Ned Carey:
@Jay Hinrichs I agree that ever increasing competition is here to stay. I also believe it will ebb and flow, all markets do.

The key is to find the opportunities the increased competition brings.

Let's hear more about this idea. How does increased competition bring opportunities. Do you mean the opportunity to sell to these buyers for max dollar? Or finding properties they can't?
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Matt Schelberg
Rental Property Investor · Baltimore, MD · Member since 2013 · 281 posts · 257 votes
12y
Originally posted by @Justin Pierce:
Yeah, the hedge funds are certainly a factor across the board. They're putting a lot of money into the market and it's hard to calculate how this is changing the market dynamics.

I tend to agree. With a stock market that most folks agree is fairly valued, a lot of these hedge funds are chasing yield. They are not finding it in the stock market and definitely aren't finding it in the bond market. So hedge funds are looking for places to put that money to work and one place is tax liens. The best thing we can hope for is a correction in the stock market next year -- that should lower competition a bit.

@Ned Carey I watched the auction as well and noticed that prices went higher the later we got into the auction. By the final few batches, even low end areas were going much higher than last year it seemed. Maybe people were chasing near the end and increased their bids?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Matt Schelberg

when we were very active in TAX sales in CA circa 1965 until 1985... here is how it went.

100 people in the audience at the court house, tax collector would go through each item in auction style. WE would buy virtually anything with value in the first half of the sale and the first 20 or so we got for opening bid. By the end of the sale as you so correctly pointed out.. The newbies now afraid of not getting anything jumped in and we backed off.

In open auctions like these the first deals are usually the best with the last ones bid up out of sight
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Ned Carey

@Account Closed

Ok here is a thought just like pre foreclosure there is pre tax sale. Lots of work but get to them before the sale. this is common on west coast not sure if it is in a tax cert state.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Originally posted by @Jay Hinrichs:
@Ned Carey

@Account Closed

Ok here is a thought just like pre foreclosure there is pre tax sale. Lots of work but get to them before the sale. this is common on west coast not sure if it is in a tax cert state.

I've probably bought only 1 or 2 properties in the past 15 years that weren't tax defaulted. The tax default often just one of many distresses, but it's almost always there.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Account Closed

K M P agreed although with certs they are delinquent every 6 months or 12. so there are literally thousands of them per county.. in CA.. of course this is true as well but its not public notice until 5 years of delinquent tax's.

I guess one could just follow certain props they were interested in and check in with the tax collector twice a year and see the status. Lots of work kind of like finding a needle in a haystack
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Originally posted by @Jay Hinrichs:
@Account Closed

K M P agreed although with certs they are delinquent every 6 months or 12. so there are literally thousands of them per county.. in CA.. of course this is true as well but its not public notice until 5 years of delinquent tax's.

I guess one could just follow certain props they were interested in and check in with the tax collector twice a year and see the status. Lots of work kind of like finding a needle in a haystack

Oh it's public notice. A list of everyone who is tax defaulted in CA counties for the current year is published annually in Sept. in a local adjudicated newspaper. The tax collector has lists of everyone who is in power-to-sell status (5 years defaulted). And all my data providers provide up-to-date info on defaults for every property.

Notice is not an issue. Seller motivation, finding the owners and/or heirs and equity are the challenges.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
MKP stand corrected you are right.. as I think back on it we just never followed them until D day... back in the 70's and 80's pre anything was a concept not yet brought to the forefront of RE investing at least to us.

We had all the inventory we could handle yearly at the tax sale and weekly at FCL sales. Not to mention just buying form motivated sellers.
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y
Originally posted by Kristine Marie Poe:

Originally posted by @Ned Carey:
The key is to find the opportunities the increased competition brings.

Let's hear more about this idea. How does increased competition bring opportunities.

K.Marie Poe as you pointed out many deals often have a tax default as part of the motivation. Knowing the tax sale holder has overbid and will be unable to take the property puts you in a strong negotiating position.

My attorney was so upset after the sale (he was going to have less business this year) he was saying he would send out letter to homeowners. He would offer to help then negotiate with the tax lien holder or even avoid paying the altogether.

I have had tax lien holders accept substantially less than owed when buying deals because I knew they could not foreclose. I got a bank to short a loan becuase of the tax foreclosure then because I knew the deadline for the court case I got the tax lien holder to short. I made $60-70K, all by playing lien holders against each other.

It can be pretty complicated and you really have to know the rules but I have made some killer deals in overbid situations.
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