Tax Deed in Atlanta question

Tax Liens & Mortgage Notes
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Tax Deed in Atlanta question

Rick Baggenstoss
Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes

I'm looking into purchasing a Tax Deed(s) in metro Atlanta, Georgia.  Tuesday I'll go to bid on a couple of them.  

My questions are:

- When a property is in pre-foreclosure, would you expect the bank to redeem?  Early or last minute?

- Since you're acquiring the Tax Deed, does the premium apply to the amount paid or the amount of taxes, penalties, etc.?

- I'd like to own some of these houses.  It seems safe to say the properties with lengthy periods of tax non-payment are most likely to be houses the high bidder could foreclose upon.  Is this a fair assumption?  

Thanks for your thoughts.

Rick

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Tom Yung
Investor · Winnipeg, Manitoba · Member since 2013 · 303 posts · 321 votes
12y

@Rick Baggenstoss

This is just based on my limited experience.

1) when a property is in per-foreclosure, I will expect the bank to redeem. Most asset manager is so slow on their moves. I will say after you acquire the tax deed.

2) In GA, you are getting 20% penalty for the amount of the winning bid.

Let's say outstanding tax & interest & service fee are $1000.

You won the bid for $30K. You will get 20% penalty on day 1 & additional 10% over 1 year.

3) My experience with GA tax deed redemption rate is under 40%, Usually are the closing agent goof up on the closing without paying the tax.

Hope this helps  a little

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  • Tom Yung
    Investor · Winnipeg, Manitoba · Member since 2013 · 303 posts · 321 votes
    12y

    @Rick Baggenstoss

    This is just based on my limited experience.

    1) when a property is in per-foreclosure, I will expect the bank to redeem. Most asset manager is so slow on their moves. I will say after you acquire the tax deed.

    2) In GA, you are getting 20% penalty for the amount of the winning bid.

    Let's say outstanding tax & interest & service fee are $1000.

    You won the bid for $30K. You will get 20% penalty on day 1 & additional 10% over 1 year.

    3) My experience with GA tax deed redemption rate is under 40%, Usually are the closing agent goof up on the closing without paying the tax.

    Hope this helps  a little

    4Reply
  • Rick Baggenstoss
    OP
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    12y

    Thank you so much Tom!  I would also expect the bank-owned properties to redeem.   Seems like the high value homes that have been foreclosed are going to be the most competitive.  Is that right?

    #2)  20% on winning bid blows my mind.  That's a handsome return for a pretty passive approach.  I keep thinking I'm missing something here. 

    @Tom Yung How many of the properties you bid on (or planned to bid on) did you win?  

    I'm imagining a lot of competition at the higher end valued properties and almost none on the lower end.  We'll see.

    Thanks again for your thoughts.

    Rick

    2Reply
  • Tom Yung
    Investor · Winnipeg, Manitoba · Member since 2013 · 303 posts · 321 votes
    12y

    @Rick Baggenstoss 

    Yes, i have seem some quality property bid up almost to retail. and it is always the same 5-6 bidders that you see dominating the winning bid. I think few of them has their own brokerage firm.

    I just have a property redeemed by an asset manager before they put it into foreclosure auction. The shortest time I experienced is between 3-90 days when they are in per-foreclosure. It can be a very good passive income even if I have to figure in my traveling cost against the 20%. In you case, it is much cheaper, be there early, so you got a spot at the front. Sometimes it's hard to hear.

    Actually I see more & more people in the last couple auctions than before. So competition is high. Good luck on your bidding.

    0Reply
  • Rick Baggenstoss
    OP
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    12y

    So I just observed a municipal tax auction.  Everyone there was observing.  There wasn't even a bid on any of the 7 properties.  They were unbuildable lots.  Buildable lots would be worth $300k+.  

    I had a chance to pick the brain of the auctioneer who runs the auctions for a number of the counties and municipalities in GA.  He summed up the strategies as one of two:

    1.  Go after redemptions - focus on the larger value properties and hope for redemption.  Many bidders are from out of state and don't want a condo/land, etc. out of state.  Pre-foreclosures he said may or may not redeeem.  The bank will sometimes take the excess funds (difference between redemption amount and winning bid) as a immediate cash benefit on their books and write off the loan.  The loan is backed by Fannie/Freddie so it's a pretty reasonable approach for the bank.  In this case the winning bidder would own the property they may not want to own, but at a great price.  This happens when the loan is fairly new on the house so the principal hasn't been paid down much.  Competition for higher value tax deeds is pretty high.

    2.  Go after the house - Go after tax deeds that have a lower likelihood of redemption because the house needs to be rehabbed.  This is not a passive approach, but one the small investor could do well.  

    @Tom Yung Hope this helps you in some way.  Thanks for your thoughts.

    6Reply
  • Tom Yung
    Investor · Winnipeg, Manitoba · Member since 2013 · 303 posts · 321 votes
    12y

    @Rick Baggenstoss

    Thank you for the info. I belong to the first group.

    Aiming for the penalty more than the property. 

    After foreclosing, Any property under 35K, I use them for holds & flip when there is a spread of 50K. 

    Out of the 5 properties that I foreclose last month that back by Fannie/Freddie, 2 redeemed. I foreclosed on the other 3, one is going to be a flip.

    It is quiet often with no properties on auction( redeem at the last minute); except land. 

    I have to do a lot of due diligence each time because of my traveling cost.

    Once again thank you very much for the update.

    0Reply
  • Rick Baggenstoss
    OP
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    12y

    After going to the County auction later that day, I saw another couple of strategies.

    3.  Bottom feeder -  Folks looking for sub $10k Tax Deeds.  Mostly folks looking for non-competitive situations including town homes, run down houses.  Low likelihood of redemption.  (not pre-foreclosures)

    4. Elephant Hunter - One guy came with his assistant.  Waited for his property to come up and rather than raising the bid by a thousand, he bumped it up $10k - $30k until it got to $150k.  He won, packed up, and probably went to another auction.  Even though he only won one, he was one of the top 3 spenders that day. 

    @Tom Yung Thanks again for the insight.

    0Reply
  • Ndy Onyido
    Toronto, Ontario · Member since 2014 · 615 posts · 172 votes
    11y

    @Rick Baggenstoss 

     and @Tom Yung 

    I have been following the thread above.  I have targeted Houston Texas ( Harris county), but the competition is extra ordinary. Atlanta and Houston are my targets.

    what is the status of the Atlanta tax deed auction now?

    My strategy will be more of #3 above.

    Thanks

    0Reply
  • Rick Baggenstoss
    OP
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    I've only attended Dekalb's auction ... one of the close in metro Atlanta counties.  The auction is only a mile from my house and has some good restaurants nearby.  I've not been able to get any of my target properties, so it's been a lot of effort with nothing to show but a couple of good lunches.

    Next auction is April.  I'll keep trying and learning.

    Rick

    0Reply
  • Tom Yung
    Investor · Winnipeg, Manitoba · Member since 2013 · 303 posts · 321 votes
    11y

    @Ndy Onyido

    replying your strategy on #3, I will add the following for you to consider.

    Most of these properties as @Rick Baggenstoss had mentioned are run down , townhomes, land lots.

    There may be additional liens on top of the tax lien, such as HOA lien. also with the townhome communities, some of them has rental % restriction; meaning the HOA only allows so much % used for rental. the rest has to be owner occupied. As an investor, you will get stuck of not being able to rent the unit.

    Most of this townhomes runs $200/month on HOA. If the rent is low, it may not cash flow as well. Another thing is the low market value of these unit.

    I will not suggest an out of state owner to own this types of properties in their portfolio, unless you know 90% sure the owner will redeem.

    2Reply
  • Pyrrha Rivers
    Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
    11y

    @Rick Baggenstoss and @Tom Yung Thank you for sharing this discussion in such detail. It's great education for the rest of us.

    0Reply
  • Ndy Onyido
    Toronto, Ontario · Member since 2014 · 615 posts · 172 votes
    11y

    Thanks  again @Tom Yung 

     and @Rick Baggenstoss 

    Good learning points.

    0Reply
  • Casey Barry
    Investor · Huntington, NY · Member since 2014 · 25 posts · 7 votes
    11y

    I currently have 2 tax deeds from Dekalb county that has to be redeemed by June or I can foreclose. This is my first tax deed purchase in Georgia. What is the next and subsequent steps for me after the redemption period has expired. Do I call the county, do I contact an attorney, etc... I'm hoping the owner redeems and just send me a check, but I know there is a chance I will have to foreclose. Please advise.

    0Reply
  • Rick Baggenstoss
    OP
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    @Tom Yung is the expert here.

    Here's what I think.

    1 day after a year, send the Notice of Barment. Since it's your first, you should use an attorney.  Get this wrong and you get to do it again.  The Barment says they can no longer redeem after the barment period ends 45 days later.  Then, you can start foreclosure.    You really need an attorney here.  You'll have to defend that you did everything correctly.  

    If the houses are worth something, you can always sell the tax deeds and avoid the legal costs.  

    Good luck!  I'd love to hear how it goes.

    Rick

    1Reply
  • Tom Yung
    Investor · Winnipeg, Manitoba · Member since 2013 · 303 posts · 321 votes
    11y

    @Casey Barry  Congratulation on winning two tax deeds in one auction.

    There are two choices that you can make in your situation. 

    1) do you think the owner will redeem. If yes, let it lapse past the one year mark. You will be getting additional 10% penalty interest for the total amount you invested in. Make sure you pay the 2014 tax or you will lose your deed out to a new tax deed owner. 

    2) If you felt the owner will not redeem,(  low value property that owns mortgage to a lender, if the bid amount is high enough. The asset manager will NOT redeem. They will go after the overbid & write off in their books.) 

    eg. tax owed $2,000.00, bid up to $30,000. Unpaid balance on mortgage $55,000.

    In a case like that, I will say 99% of the asset manager will not redeem. They will just collect the overbid. 

    The barment & clear title is basically what @Rick Baggenstoss described. DO NOT ATTEMPT to do it yourself; unless you know what you are doing. 

    Contact a law firm that specialize in clearing titles. Another thing be prepared to spend rehab dollars to fix it up for rent or resale after foreclosing.

    My experience for average tax deed rehab for rent is $5-15K. rent for $900-$1000/month.

    winning bid amount $14-32K.

    Rehab cost for sale; cost between $25-92K , sale for $90-250K, winning bid amount $15-60K.

    3Reply
  • Casey Barry
    Investor · Huntington, NY · Member since 2014 · 25 posts · 7 votes
    11y

    @Tom Yung

    @Rick Baggenstoss

    0Reply
  • Casey Barry
    Investor · Huntington, NY · Member since 2014 · 25 posts · 7 votes
    11y

    @Rick Baggenstoss and @Tom Yung

    Thank you both for your input. I will keep you posted with my progress. Has anyone used a company called tax title services? They say they can assist in clearing titles. Would I use then in addition to an attorney or can I utilize their services to both foreclose and clear the title?

    0Reply
  • Tom Yung
    Investor · Winnipeg, Manitoba · Member since 2013 · 303 posts · 321 votes
    11y

    @Casey Barry

    I will not use tax title service in GA. They have not establish as such.

    They are still consider very new in the quiet title business in GA. 

    There are a lot of articles on Tax Title service in the other BP forums. Search for them, They are  faster & cheaper.

    They are very successful in other states though.

    0Reply
  • Dan Cotter
    Developer · Atlanta, GA · Member since 2014 · 46 posts · 18 votes
    11y

    @Rick Baggenstoss helpful topic, thanks. I was batting around the idea of investing in a few small tax liens to raise capital for future real estate investments, but I've decided my time would be better spent doing other things.

    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    11y

    The main point is do not step over dollars to save pennies. Doing things on the cheap in these situations can be the difference between making a profit or losing your shirt.  

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  • Dan Cotter
    Developer · Atlanta, GA · Member since 2014 · 46 posts · 18 votes
    11y

    @Tom Yung very helpful info, thanks. For anyone in GA, also see Tom's posts here (great summary of how tax deeds work in GA): 

    http://www.biggerpockets.com/forums/70/topics/1116...

    0Reply
  • Asim Alam
    Professional · Tucker, GA · Member since 2017 · 138 posts · 29 votes
    9y

    This is two years late but I happen to know quite a bit about this subject. For 2015, the redemption rate for Dekalb County was approximately 14%, or 1 in 7 tax deeds. The numbers are still out for 2016 for obvious reasons. :-)

    @Rick Baggenstoss, did you ever end up picking up some tax deed properties?

    1Reply
  • Jessie Griffin
    Rental Property Investor · Saint Petersburg, FL · Member since 2015 · 33 posts · 18 votes
    9y

    Asim, I've invested in Florida tax liens and looking into Georgia. Would love to get any tips from you? 

    0Reply
  • Yanling Wu
    Atlanta, GA · Member since 2017 · 6 posts · 0 votes
    8y

    @Jessie Griffin I read an article recently that says Florida tax lien interest rate is getting bid down to 1% in some cases. Competition sounds really bad. Can you share your recent experience? Thanks!

    0Reply
  • Jessie Griffin
    Rental Property Investor · Saint Petersburg, FL · Member since 2015 · 33 posts · 18 votes
    8y

    @Yanling Wu Funny you asked about this as I was just discussing with another member. This last year was horrible. I bid on over 2,000 properties and didn't get a single one. It seems the last 2-3 years have just gotten worse. I have started to steer away from Florida's tax certificates since the hedge funds buy nearly all of them for 0.25% interest and bumped all of the little guys out of the game. I now invest more in tax deeds (where you own and take possession of the property immediately). These, of course, are much more of an up front investment and lots more research and work. I just assume come this May, there won't be many high interest tax certificates available again. 

    0Reply
  • Yanling Wu
    Atlanta, GA · Member since 2017 · 6 posts · 0 votes
    8y

    @Jessie Griffin I have heard about these hedge funds. It's interesting that they are going after tax lien investment. Even though interest rate seems attractive to an average investor, I would assume HF would have a much bigger appetite. Are they high risk high return folks? Anyway, I'm thinking maybe HF has more advantage for online bidding, as they could essentially create many virtual IDs and have a large pool of fund to leverage. Maybe those local auctions would be a bit better for an individual investor? For tax deeds, how much on a dollar would you typically need to bid to win?

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