Upset Sale in Montgomery County, PA (with a side of intrigue)

17 Replies

I've been reading the forums a bit on the subject of Upset Sales in PA and thought I would try to tie several of the discussions together for the upcoming sale.  For this I'd also like to invite in two main contributors of previous like topics to this conversation:

@David Krulac

@Steve Babiak

(can't get the links to work for some reason)

Since I haven't attended an Upset Sale before, I am considering just going to see the process, but also know a couple properties that will be part of the sale.  That said, I understand the following:

  • Complete a Title search and visual inspection (as possible) on the properties to understand any other issues.
  • Register for the sale.
  • If successful bidder, I would be responsible to pay the bid amount, transfer tax, recording fee, and deed prep fee.  First question- Is the transfer tax based on the appraised value?
  • I would become owner of record after Deed has been filed (4-6 months from what I've seen), but also understand that PA has issues in terms of the length of statute of limitations for adverse possession, and insurability of the Deed. 

I'm interested in two of the properties on the Montgomery County PA Upset Sale list as they are in my surrounding neighborhood and am actually a casual acquaintance of the Owner (which may not be a good situation, particularly if I were the successful bidder).  One property is the residence of the owner.  Taxes were half paid in 2012, nothing in 2013, and 2014 has no record of payment.  There is a mortgage attached to this property from 2004 that is substantially less than the appraised value.  It has not been satisfied or assigned, but there is also no lis pendens on the property.

The second property of the same Owner is commercial.  The taxes are in the same situation as the residential property.  It had a mortgage, but is noted as being satisfied in 2009.  It is part of a larger building and I am not able to assess whether it is in some way a condo, and if so, are they up to date with any fees.  The balance of the building is owned by relatives of this owner and occupy one of the storefronts with their RE company, for which this owner also works (as an appraiser for one thing). 

So if you are like me, the hair on the back of your neck stands up with that info.  I am interested in the residential property as it is an eyesore in the neighborhood.  The old saying of buying the ugliest in a great location fits this property, but after reading other posts I know there will probably be difficulties with gaining clear title from an Upset Sale in any sort of timely manner.  A flip doesn't seem to then be reasonable, but best to look at it as a buy and hold.

Question is...is there another way?  Do we look at this as an opportunity to try and convince the Owner to sell?  To add to the intrigue of this situation, the Owner has recently (June) purchased another residence in another township in the county (found as part o my Due Diligence), so they may be looking for an exit strategy for the property listed on the Upset sale.  We are late in the game for this years sale, but I am also thinking the bank may step in and pay the lien on the residence, allowing time for discussions with the Owner.  From what others have posted, banks step in all the time, but to me that doesn't end the opportunity.  Why try and go through all the issues surrounding an upset sale, when you may be able to go through an actual purchase?  Since it's not a tax lien sale, but a deed sale, we are ultimately looking to acquire the property anyway.

One thing that I do need-  a good RE attorney with knowledge of Deed sales in PA, hopefully Montgomery County.  Please pass along any names or PM me.

Thanks for listening if you made it to this point.

The title search is definitely a good idea so you don't find out about other liens on the properties after it's too late.

@Barrett Dunigan ,

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Raymond

Transfer taxes will be based on the larger of imputed value or the winning bid. Imputed value comes from taking the assessed value from the tax assessor and multiplying by the applicable factor that the PA Dept of Revenue has determined for that county and year. If you read about transfer taxes at the PA Dept of Revenue website, you should be able to find a document with a table where you would look up that factor. 

I'll mention @David Krulac  to see if he wants to add anything. 

@Barrett Dunigan  

At UPSET sales ALL liens, judgments, mortgages, etc transfer to the high bidder.  Also other UNRECORDED liens like Mechanics Liens, DPW, State Liens. IRS liens, municipal liens, utility liens also transfer to the high bidder.

I'd contact the owner and see if a pre-auction deal can be struck, which would eliminate the auction competition.  It can't hurt.

Adverse Possession in PA is 21 years, which obviously is a LONG term investment strategy.

Good luck

Thanks @Steve Babiak  

 guess where I was today?

@Steve Babiak  

correct!  There was a last minute DPW lien that added 6 figures to the debt on one property worth $60,000 before the lien.

no, everyone was smart and left that one pass with no bids.

Thanks @David Krulac  

and @Steve Babiak  

Both properties were removed from the list prior to the sale.  Doesn't mean the owners are out of the woods, so I plan on trying to approach and see if there can't be some sort of deal there after all.

@Barrett Dunigan  

That commonly happens about 90% of the thousands on the list 30 days before the sale, pay or make arrangements to pay and remove their property from the list.  Federal bankruptcy also removes the person from the list.  And since most people have mortgages, and the sale is "subject to" existing liens you need to be very cautious.  As I said before, approach the seller...... 

Originally posted by @David Krulac Krulac:

@Barrett Dunigan  

At UPSET sales ALL liens, judgments, mortgages, etc transfer to the high bidder.  Also other UNRECORDED liens like Mechanics Liens, DPW, State Liens. IRS liens, municipal liens, utility liens also transfer to the high bidder.

I'd contact the owner and see if a pre-auction deal can be struck, which would eliminate the auction competition.  It can't hurt.

Adverse Possession in PA is 21 years, which obviously is a LONG term investment strategy.

Good luck

Thanks @Steve Babiak  

 guess where I was today?

 @David Krulac I know this post is 6 mos old, but with everything you state above, how is it that you bid on these courthouse deals and protect yourself? As you stated above, outside of a Title search "UNRECORDED liens like Mechanics Liens, DPW, State Liens. IRS liens, municipal liens, utility liens also transfer to the high bidder" how do you protect yourself from these potential problems when bidding??

@Rick Bevilacqua - you conduct a judgment search to attempt to discover those sorts of things. 

@Steve Babiak

 Can the title company typically run that as an added service to the standard title search?

@Rick Bevilacqua

IRS, municipal and utility liens are usually recorded.  A title search will reveal these as well as judgments.  One property that I bought had a judgment from where the owner got in a bar room fight and injured somebody who sued him for medial bills and got a judgment.

Un recorded liens like welfare, DPW, and some state liens are not recorded.  Mechanics liens are recorded EXCEPT that they have 6 months to file, that's the gotcha.  There is due diligence above and beyond a title search which must be done.

One example would be for state liens would be to contact the PA Dept. Of State to see if an entity is "in good standing", and getting a state lien certificate. 

@David Krulac

 Do you have a checklist of your due diligence items that you implement on every potential tax sale purchase in PA? That might help clarify (for me anyway) all of the things to be researched and investigated before a potential tax sale bid. Thanks!

@Rick Bevilacqua

I don't have a check list.  I've been trained in title searching by a law firm, so its been ingrained.  In addition, I been doing this long enough that something new doesn't shock me or surprise me.

I bought a house where the owner went to a nursing home 15 years prior.  As long as the former owner survived the nursing home didn't put a lien on the property.  I sold it to a rehabbers, who devoted a month exclusively to fixing the place up then they resold it.  by the time the former owner passed, the property was sold 3 times and the nursing home lien didn't attach to the house.

On another property I knew the owner was deceased, there were no recorded liens on the property.  It was a fairly nice house, somewhat dated but in good condition.  I was able to get the will (from the courthouse) and saw that there was an heir who lived in the same town.  Since the house clearly had value, and that the heir lived in the same town, it struck me as strange that the heir just didn't pay the taxes and save the property from the tax sale.  Something wasn't quite right! I contacted the heir and found out that the heir didn't transfer the property to them selves, not pay the taxes because of an unrecorded DPW lien for nursing home care for the decedent.  It was thousands of dollars.  Fortunately there was an overage of funds from the bid up at the sale that was sufficient to satisfy the DPW lien.  I contacted the county that had sold the property and informed them of the unrecorded lien so that the overage funds could be applied to the DPW lien.  If I had not contacted them the funds would have been distributed to the heir, and I would have had to pay the lien.  So knowing that something wasn't right and doing further investigation saved me about $50,000 in lien satisfactions. 

Wow! I guess nothing fully prepares you but life experience and the school of hard knocks!

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