Investor · Sanford, FL · Member since 2014 · 6 posts · 0 votes
I received a certified letter for verification of Allowable expenses by tax sale purchaser from Jefferson County AL. I bought a tax lien property earlier this year from someone who purchased a house at an auction. I've invested money into the property and i'm literally a month away from renting it out. I've stopped the contractor from making repairs to the property. I just received the letter Saturday (two days ago). What do I need to do to inform the owners that I need to be reimbursed for improvements made in the home? Is there an example template or letter that I could follow to send to them? Do I need to show receipts? Much of the work was done by myself or family?
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
8y
Not sure about Alabama, but in Texas the only reimbursable expenses are for safety, security, and preservation of the property. Other improvements are not reimbursable expenses. So new locks are perhaps reimbursable, but new kitchen cabinets would probably not be.
You need to look at the applicable Alabama law for tax sales.
One of the first things you should do is also ask for proof of ownership. A deed or something similar.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
8y
AL has unique laws, supposedly you get reimbursed for the “value” of the improvements. Denise Evans is a pro at AL tax liens....she has YouTube videos, materials, etc. I’d try to PM her on here, google her up.
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
8y
@Wayne Brooks, @Kee Wilder, I feel like Batman--someone mentions my name on BP, and it's like shining the bat light into the heavens, I know to come help!
Kee, you are entitled to be paid the amount you improved the value of the property with your preservation improvements. HERE is an article of the rules and time limits you must follow. There is one minor change I have not had a chance to update yet. The two referees must appoint an umpire immediately if they can't come to an agreement, and then the three of them have another 10 days to decide on a value.
Investor · Danvers, MA · Member since 2016 · 50 posts · 5 votes
8y
@Denise Evans, @Kee Wilder
Denise I think you are more helpful that Batman!! I am in a similar situation as far as needing to know what can be included in the repair list. I have a cert on a property in Mobile and have received a yard violation from the city. The house is quite obviously not in use and hasn't been for some time. I assume that I can take possession (change locks etc) and perform structural repairs sufficient to bring it back to habitable standards but my question is does that include sprucing up the property itself ie tree trimming grass cutting and the like to maintain neighborhood norms? As always thank you very much
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
8y
Thanks, @Roger Gelpey. There is some debate about the yard issue. The statute says, "As used herein, "preservation improvements" shall mean improvements made to preserve the property by properly keeping it in repair for its proper and reasonable use, having due regard for the kind and character of the property at the time of sale." I am of the opinion that includes yard work. Many redeeming taxpayers say it does not, and it provides a point of argument that gives them leverage. But, if the city cut the grass and placed a lien on the property, and you paid off the lien, the redeeming taxpayer would have to reimburse you for that lien payment, plus 12% interest. I think it is better to do the yard work to start with. I think the first time you clear away the "jungle" you indeed increase the value of the property. After that, I think the "value" is equal to the cost. Don't get carried away with beautifying the place. Just prune dangerous or out of control limbs, keep the grass cut, and edge if the other houses in the neighborhood typically all edge their lawns. Make good notes about pressure from city, and write down names and dates and phone numbers for your notes.
Investor · Sanford, FL · Member since 2014 · 6 posts · 0 votes
8y
Thanks @Denise Evans. I've made many improvements to the property to insure it was properly secured and to prepare it properly to become a rental property. I've even hired a property management company. I've also maintained the yard maintenance. However, the yard is very large and the back yard contains a space with many weeds. The city has sent a letter to me stating that the weeds are a nuisance and need to be removed by 10/12. I was about to have more yard work done to insure this was handled but I was told by the county that I should stop all repairs since the owners want to redeem. What would you suggest I do in this situation? Also, is there a template you would use to respond to the redemption request? I know I only have 10 days to respond to the county but I don't want to risk losing the money i've invested outside of the taxes. I bought the property from someone that got it from an auction. They are not responding and i'm not sure how to go about getting the additional money I even paid them to transfer the property to me.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y
@Kee Wilder I don't mean to be disrespectful but why would you make improvements without knowing in advance what is allowed? I point this out for others that may be reading along to learn from your experience. All areas of real estate have hidden costs and risks. Especially in an area as complex as tax sales it is important to know the laws before jumping in.
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
8y
If you paid the original investor more than the calculated redemption price plus however much you increased the value (not the cost, but the increased value) with your preservation improvements, then you will just lose that money. I know that is harsh, but that's how it works in Alabama. Please read my article about redemption and improvements, HERE. If you want to buy a property and pay more than the redemption amount (because you think you'll be okay once you make preservation improvements) then cut a deal with the seller. Pay the redemption amount right away, and escrow the balance of the purchase price for an agreed time period. Usually however long it will take you to complete your preservation improvements. Have an agreement about how to split the escrowed funds if someone redeems before anticipated. If the margin is small, a couple of thousand dollars, then just take the risk. If we completely hated risk, we'd invest in Treasuries, not real estate:)