I found a distressed seller who wants to get rid of his property.
His house appraised around 500k but the market value is more towards 440k
He owes the bank 410k and there is a 15k Tax lien on the house. The house also needs about 10K in updates..
I'm thinking a subject to deal and than a lease option but i have to get rid of the tax lien first right?
Any suggestions how to structure a deal here?
Any suggestions is much appreciated!
Lender · Woodland Hills, CA · Member since 2013 · 362 posts · 115 votes
13y
Hey Alan Langer the tax lien always will have first priority, even before the first mortgage.
You can do the subject to, or master lease, or whatever. . . but that tax lien will eventually need to be paid for clear title.
If it is a good enough deal, have the guy deed the house over to you, OR put it in a land trust, and once in your name pony up 15K in food stamps to Uncle Sam.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
13y
@Alan Langer - Tie up the deal to purchase the equity rather than a price point for the real estate, then work on eliminating the tax lien, presuming this is a Federal Tax lien.
Make a list of things that the IRS (again, presuming this is a Federal tax lien) would not want to be associated with and find those problems in this property.
Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
13y
Alan - in addition to the great advice you've already received, make sure that the property isn't a property tax lien (as opposed to a federal tax lien like Rick Harmon suggested). If a property tax lien, double make sure that the mortgage co. hasn't already paid this off.
It's sort of unusual for a mortgage company with such a big position ($410k) to allow a small $15k to exist and possible wipe away it's collateral. It happens but not often.
Even if the lien is showing up as being open in county records, check directly with the tax collector. It's quite possible that the mortgage co. paid it off and somehow incorporated it into the mortgage payment. Confirm all numbers with their sources (i.e. mortgage co, tax collector etc.) before proceeding.