Purchasing tax liens from an investor?

Question

Has anyone out there done this? I am interested in buying an already purchased tax lien that was already bought at a sale. Could I offer to pay off the full amount (plus interest) to them and go from there? Since I know it will be asked, the why, is basically that I'm hoping to get the property, since I know it's going into foreclosure, and I want to wholesale to area flippers that love snapping up deals in this neighborhood. I don't know if that's stupid, but I'm willing to try for that amount of money, and worst comes to worst, I feel like I can sell it as-is for a decent profit still. Anyone done anything like this and can give me some ideas? Thanks!

John Underwood · Answer

Yes I have sold a lien prior to getting the tax deed. I contacted the owner and found out they were not going to redeem the property. I sold the property for 3 times what I had in it. I put in writing that if property were redeemed that I would refund them the extra they paid. Just went to tax office and reassigned lien to other person. Very easy.

Ned Carey · Answer

@Melissa Kirchhoff if you came to me I would expect a premium over what I was owed in order to sell the lien. If it looked like a possibility to foreclose and get the property then i would want an even larger premium because I want the property also.

Tax lien holders have little incentive to sell their liens, unless they figured they are a loser. Unless you know something about the property that they do not know, there may not be much opportunity here.

I have sold a very small percentage of my liens. Mostly to owners who said I will pay you off now or you can sell me the lien for a premium. There goal may be to clear the title or wipe out a mortgage.  I take the premium. I have bought liens for similar reasons.

Emmett R. McCarthy · Answer

I have lots of clients that are involve in these kinds of deals. Yes you can do it. Tax liens in IL are freely assignable. If the Seller knows what they are doing, the purchase/assignment price starts at the redemption amount and goes up from there. Be aware that you need to make sure the Seller has strictly complied with the Property Tax Code so that the lien is still viable.

Josh Carr · Answer

@Melissa Kirchhoff If you came to me I would give it to you at the same cost the county would if you purchased it from the county with minimal fees to acquire.  Many people sell secondary liens.  You can find some on www.bid4assets.com or any of the sites out there that have secondary liens.  The transfer fee is necessary to transfer the liens into someone else's name and the paperwork required has to be filled out correctly.  If you go to www.iltaxsale.com and see if LaSalle county has some assignable certificates that are on the same property you can pick up and then you will have something to work with on that property.  All of  their liens will be past the redemption period already.  Let us know how it works out.

Melissa Kirchhoff · Answer

@Emmett McCarthy - Yes, very good point -- I will definitely be having a local attorney helping me out on this!

@Ned Carey - Yeah, that's what I figured. I felt like many of the investors had the goal of getting the 18% (or whatever) return on it and wanted to be done with it. I figured there was a chance they wouldn't want to sell, or sell for something very high, if that's the case, that's okay, I'll move on, plenty out there and hopefully I can get into a sale soon. However, I wanted to find out more before actually contacting the lien holder so I had my game plan. It's still good to hear feedback from someone who is on that end, thank you!

Emmett R. McCarthy · Answer

If you ask the Seller, I am sure they will say they "complied." The issue is whether they "strictly complied." I suggest having an attorney who practices in the field review. As for as mortgages and other liens, tax deeds wipe all prior interests (with a few exception, IRS liens, municipal "police and welfare power" liens). The mortgage is cleared from title and the mortgagee's only recourse is to sue the borrower on the note.

Melissa Kirchhoff · Answer

Awesome! Thanks for the responses.

So just to clarify, @Emmett McCarthy, do you typically just contact the seller and asked if they complied? What is your process for that?

Also, what is the process if there's an outstanding mortgage on the property? I know tax lien would take priority but I imagine you're not just free and clear if there's money owed to a bank still?

I guess I still have lots to figure out and learn, but it's very encouraging to know this is done and not a half-baked idea I concocted! Thanks!

Purchasing tax liens from an investor?

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