Tax Liens Property Research

13 Replies

Hello and thanks in advance for any insight!

I have been doing superficial research on Tax Liens for a while now, and I'm ready to take the plunge in 2015 with a small amount of "test" or "play" money...maybe $1000. I have some real estate investor experience, and I'm a licensed RE agent as a complement to my other career.

 I've read nearly all the posts on this website and am particularly grateful for the insightful and very analytical posts by seasoned investors. Reading about "web scraping software" and all those excel spreadsheets has definitely been fair warning: this is serious business. I get it. However, despite a basic understanding of the concept, I feel like I need a better road map on how and where to start the research in each county. I'm not as worried about figuring out how county's rules, more about analyzing each property individually; how to figure out where to go for important property data. 

Could anyone lay out a basic flow chart of how to analyze the property once a property is identified? i.e., tax assessor's office, drive-by, investigation of environmental concerns. What else are the key elements of analysis?

I am looking at Arizona, maybe eventually Florida...

Finally (and separately) Can anyone comment on experience on California's tax DEEDs? I live in California, so working locally makes sense, but I know this is a completely different process than tax liens. No one seems to write about tax deeds, so should I bother taking the time to learn/invest? 

Thanks much...looking forward to lots of research soon....

@Carla Carvalho First - I love the phrase "superficial research" - what a juxtaposition that makes it memorable! I use those type of phrases all the time when I speak or write and it actually works well for comedians too. (I have a side gig ghost writing for comedians and speakers).

I felt I have been "called out" by your post based on what I talk about here on BP; use of spreadsheets (check), web scraping software (check), Arizona and Florida tax lien investing (check & check).

You ask a great question though - how to do the analysis on the properties.  Much too long of a subject for a forum post.  Honestly, your research is more driven by your strategy for buying liens and then state laws.

  • Going for high interest rate return? Then look for residential properties with a mortgage that is current and this is the first year of liens.  If you can drive by, then look to see if it is still occupied.  Do the same for commercial units.  You want the owner to pay, so an occupied unit with a valid mortgage is your best bet.
  • Going for future foreclosure? Many methods here. Vacant land or improved land? Look for no mortgage recorded, few other liens recorded (expect some city liens if the property is abandoned and the city has to mow the property), vacant building if an improved parcel.
  • Being a licensed RE agent - get the local values. Make sure the property is worth more than the lien amount and foreclosure costs.

That's just a couple of strategies.  The places to research are the county recorder's office or website.  Note - other investors are talking about county websites that lag the actual county records in terms of liens filed and changes in deed.  I haven't seen that in my dealings yet, but you want to be aware it could exist.

The recorder's office should have all liens (includes mortgages and release of mortgages/liens), easements, and other legal documents that affect the deed.

If you have a good relationship with a title office, there are searches they can do that are less than a full title search that are less expensive than a full title search. You have to be comfortable with the legal terms and documents they give you.

Drive by's are always great.  Google street view is fine for seeing the area, but buildings burn, are defaced, torn down, etc. and the Google pictures can be 3-4 years old. I'm heading to Arizona in a couple of weeks to look at the areas in which I buy liens. I go about every 18 months.

The EPA website is great for a quick check on any EPA filed issues.  See my BP blog post on using that site.

This is a start. It is by no means a full due diligence list. The state and county laws will drive more research. (HOA liens, other tax liens, ownership notifications when foreclosing on a lien, etc)

Due diligence isn't talked about much because it can vary so much.  I'm sure others will add their thoughts and fill in the gaping holes I didn't mention here.

@Jerry K.  You are spot on. I know that for a fact some counties information, especially in Texas can be as much as 120 days behind online. In counties with 50,000 or more residents, the counties are required by law to separate the tax office from the appraisal district. It is the appraisal district that provides all ownership information to the tax office. This separation generates a 30 day delay alone.

Great thread. Since real estate title, tax, probate and other laws vary so much from state to state, I'm in favor of selecting a single state to focus on the the beginning, otherwise, it's easy to get overwhelmed and never do a deal.

Since you are in CA, why not begin with CA delinquent and defaulted taxes?  As a licensee, you should already have a strong working knowledge and familiarity with title. Remember that we have 58 counties to work in. 

As a serious professional, you'll want to get serious education about title. For starters you can take Ward Hanigan's one-day title research training in San Diego. This will give you a more thorough understanding of the topic and a better sense of how to monetize opportunities. 

I suggest you use defaulted taxes as a trigger to create target lists but solicit to buy before the sale or at least become the owner of record prior to tax sale.

Then you'll need to become an efficient title researcher and skip tracer. I suggest that you get training for these skills and then find ways to delegate.

Lastly, but perhaps most important, is that you'll never do deals without a deal flow so you need to become a really strong marketer. Despite having a degree in marketing from a major biz school, I didn't really make much progress until I learned his direct response marketers were successful by studying Jay Abraham, Dan Kennedy and others.

Keep us posted!

Thanks much, all very insightful. And a bit overwhelming for a newbie. @JerryK, no need to feel called out. Your experience is a gentle reminder that this stuff isn't kids' play. And that alone is invaluable. 

@Carla Carvalho   I meant "called out" in a playful manner.  I didn't think there was malice. Your question is valid and you can see there are many aspects to due diligence. Hopefully others will join in as well. 

I found that land is a good way to start out with tax liens especially if you're hoping to end up with the property. You can do far more research online and don't necessarily need to drive the properties as you would with improved lots. Driving the properties is one of the most time consuming and expensive aspects of the research process. For this reason, I try to avoid it as much as possible. I use a lot of Google maps and county GIS maps to get a feel for the properties I want to bid on. I might drive a few that seem to have high potential. 

David Boykin, Real Estate Agent in SC (#91868) and GA (#361370)

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I am looking to invest in the next tax lien certificate sales in Arizona. The Counties I am looking to invest in are Cochise, Maricopa and Pima. I was stationed at Fort Huachuca, Az several years ago so I am familiar with the areas. The next sales will be held in February 2015. One thing I like about Arizona is they have "assignment purchases", which means properties that don't sell can be purchased OTC.

Texas is the only state I have an interest in investing when it comes to tax deeds. 1) Texas has 256 counties, 2) Texas pays a 25% interest 3) Texas has assignment purchasing(Struck Off properties) 4) The redemption period is only 6 months.

Originally posted by @David Boykin :

I found that land is a good way to start out with tax liens especially if you're hoping to end up with the property. You can do far more research online and don't necessarily need to drive the properties as you would with improved lots. Driving the properties is one of the most time consuming and expensive aspects of the research process. For this reason, I try to avoid it as much as possible. I use a lot of Google maps and county GIS maps to get a feel for the properties I want to bid on. I might drive a few that seem to have high potential. 

Surely you aren't suggesting buying a property without actually seeing it or having someone look at it for you?!  I have a personal example from this month where the google pics (from 2013) showed a nice looking small brick house (<900 sf) with an addition that should have increased it from a 2 bedroom to a 3 bedroom.  Since the property had a minimum bid for <10K it was very difficult to not buy it even though I had not driven by.

Fortunately, I stuck to my rules.  The house had been severely damaged both by someone removing a large tree from the front and by deconstructing the addition and most of the interior of the original house.  I'd post the before and after pics if I knew how.  My best deal of the year so far was walking away from that one with my money still in my pocket.

@Roy Oliphant  

I was specifically referring to my strategy for buying tax liens for unimproved property. For land, I've bought plenty of tax liens without actually seeing the property. For improved lots, I would absolutely recommend driving the property. However, I've bid on liens for improved lots without viewing the properties before. I only do this if the bid is so low that it makes sense based on the value of the land alone. 

David Boykin, Real Estate Agent in SC (#91868) and GA (#361370)

@David Boykin  

That makes sense.  What is your strategy for monetizing the lots?  We are currently only buying houses for cash flow but there seems to 10 lots for every one house available.

Ok, I'm feeling like hot stuff as I get ready to rev up for my tax sale....ready to get my goose cooked.

Does anyone have an update on Maricopa limiting accounts? Otherwise, I will call on Monday.

My husband brought up an interesting question: does anyone know how often the banks will payoff the taxes (say in a 3rd year situation) to avoid a lien holder from foreclosing? Seems like in a situation where judicial foreclosure is imminent, the bank may be more of a "threat" than the property owner in terms of last minute redemption. Is this accurate and is it a big concern? 

Also, can anyone advise on how to find out if/how much IRS or HOA liens are owed? Is this part of the data contained in the Recorder's Office (I'm bringing some good cookies to the Recorder next week when I visit.....)

Thanks much!

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