Texas Tax Lien or tax deed info help wanted

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Texas Tax Lien or tax deed info help wanted

Cortney Arenstein
Rental Property Investor · Katy, TX · Member since 2016 · 52 posts · 44 votes

Who here is in Texas and playing the "pay delinquent property taxes and then wait for the interest" game? I have had my eye on a distressed property (boarded up apartments) for a while, and the owner is in distress too (partner is being federally indicted for fraud, they are going through a messy and expensive divorce, this asset was recently moved from an LLC into a trust--if I had to guess there is some chicanery afoot). Well the property taxes are now late and unpaid and as far as I can tell, if I pay this $5k, I can expect to either 1) get paid back when the owner redeems the property--but with interest or 2) get the deed if she never redeems it.

What I am NOT sure of is A) the time frame of this process--I think it is 180 days +? and B) the actual percentage return I could expect if she redeems it. 

Also, the IDEAL end game is to buy the property. She tried to sell it last year for $250k (bought it in 2016 for $100k) and then withdrew it from the MLS. I can make the numbers squeak by at $250k but would prefer to get it at $125-150K and have some comps to support THAT price. Seems like paying her taxes might be seen as an aggressive and hostile move and then she might not be willing to discuss selling at a reasonable price...

Google is SOMEWHAT helpful but all the "experts" are selling something. ANyone have direct experience here with this?

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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
5y

@Cortney Arenstein,   @Kyle J. covered it very well

Texas is a tax deed state.  You buy tax deeds from the county at auctions. Theoretically you can also buy the "over the counter" for deeds that don't sell at the auction, but it is extremely rare for anything of significant value to sell over the counter.

I believe, but not sure, there is a "right of redemption" in Texas.  Perhaps one of the TX tax deed experts will chime in  (I think @Arnie Abramson

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  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    5y

    @Cortney Arenstein  Laws related to tax liens and tax deeds vary greatly state-to-state, and I certainly don't claim to be an expert on them in your state.  However, I'm very familiar with how they work in my state, and somewhat familiar with how they work in others.  

    With that being said, I'm not familiar with any state where you can simply "pay someone's delinquent property taxes and then wait for the interest" or "get the deed" as if you then have some sort of ownership right in the property.  

    What generally happens is, if a homeowner fails to pay their taxes, at some point the government/taxing authority will place a tax lien on the property and then sell that tax lien to third-party investor through a tax lien sale. The investor who purchases the tax lien basically buys the right to collect the unpaid taxes, plus interest.  (The investor is not buying the property though.)

    With a tax deed sale, the actual deed to the property is being sold.  The investor who purchases a tax deed property actually owns the property after the sale.

    This is just a very high level overview of both of these processes, and - as I mentioned - the laws with both vary greatly state-to-state.  Plus, not every state does both tax liens and tax deed sales.  Many just do one or the other.  

    Ultimately, my point is just that you should probably research tax liens and tax deed sales a little more before you just "pay someone's delinquent taxes" because all that will likely entitle you to is a "thank you" from the delinquent homeowner.   

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  • Cortney Arenstein
    OP
    Rental Property Investor · Katy, TX · Member since 2016 · 52 posts · 44 votes
    5y

    @Kyle J. thanks! That is what I needed to know--I knew it seemed a bit unlikely. 

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    5y

    @Cortney Arenstein,   @Kyle J. covered it very well

    Texas is a tax deed state.  You buy tax deeds from the county at auctions. Theoretically you can also buy the "over the counter" for deeds that don't sell at the auction, but it is extremely rare for anything of significant value to sell over the counter.

    I believe, but not sure, there is a "right of redemption" in Texas.  Perhaps one of the TX tax deed experts will chime in  (I think @Arnie Abramson

    2Reply
  • Gabriel Elias
    Member since 2020 · 4 posts · 1 vote
    5y

    There is no way she would know that you payed for her backed taxes :) So why not take the chance and pay for it, she might not redeem and the property is yours! 

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  • Cortney Arenstein
    OP
    Rental Property Investor · Katy, TX · Member since 2016 · 52 posts · 44 votes
    5y

    @Ned Carey thanks! I did discover that the right of redemption is 24 months for a homestead property and 180 days for commercial.

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  • Cortney Arenstein
    OP
    Rental Property Investor · Katy, TX · Member since 2016 · 52 posts · 44 votes
    5y

    @Gabriel Elias nope this is exactly wrong. Eeek! But I was definitely thinking that was close to what would happen. It wasn’t. As the first comment states, it doesn’t work that way. (And the way Kyle phrased it helped me Google better so I was able to find the info I was missing) she has to not pay for a long time before the taxing authority puts a lien on her property. Then once there is a tax lien placed on the property by the tax authority, if the owner still doesn’t pay, THEN there is an auction. And the owner has plenty of advanced warning about the auction. And everyone on the mailing list or watching the property lists knows about the auctions and can show up to bid. (After registering as a bidder)

    And a lot of these get cancelled at the last minute when the owner finally begs borrows or steals the owed amount. There are even attorneys out there advertising to “help you deal with tax liens on your property.”

    I am actually scheduled to go to a tax lien bootcamp later this month (more education is needed on my part for sure!) but I got a little excited when I saw she hadn’t paid her taxes yet—thus my reaching out here when I couldn’t find the exact information I was looking for.

    Luckily Kyle saved me from a $5k mistake that would have stemmed from my incomplete understanding of the process. Thank god for this forum because I had literally been googling for two hours trying to figure out how this stuff ACTUALLY works to no avail.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    5y

    @Cortney Arenstein be very very skeptical of anything they try to sell you at the tax lien boot camp.  It is very easy to make the tax lien game sound great but there are risks.  In particular be skeptical of any liens they try to sell you.

    1Reply
  • Arnie Abramson
    Texas Tax Sales Services · Merit, TX · Member since 2014 · 256 posts · 166 votes
    5y

    Thank you for the kind words Ned.  Cortney, if you are going to a class on lax liens it is very doubtful that you will learn about tax deeds in Texas.  There are several zoom presentations on Texas every month and Texas is significantly different than any other state.  BTW, if you pay the back taxes for someone in Texas, for example, it will not jump ahead of other liens unless you are a licensed tax lien lender or jump through the hoops they do if you do 5 or less in a year. 

    Yesterday was the tax sale in Texas for February and there were around 50 counties that had a sale.  There are already almost 30 that have announced a sale for March.  Let me know if I can help or if you have any questions.

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  • Felipe Lois Affini
    Flipper · Anna-TX · Member since 2017 · 71 posts · 76 votes
    5y

    @Cortney Arenstein, I am glad you didn't pay the taxes. You would have lost your money.

    As Texas is a tax deed state I would search for specific education. Reach out to @Arnie Abramson and check if you could attend one of his seminars (you can do it from home as he mentioned he is doing through Zoom). He helped me a lot in understanding and investing in properties in Texas (even I am not living there) successfully. 

    Also, as most of the auctions happens at the county courthouse, I would attend one (check the closest county from your home having a sale in March) to see how it goes (and start to understand the process and legal terms).

    1Reply
  • Cortney Arenstein
    OP
    Rental Property Investor · Katy, TX · Member since 2016 · 52 posts · 44 votes
    5y
    Originally posted by @Arnie Abramson:

    Yesterday was the tax sale in Texas for February and there were around 50 counties that had a sale.  There are already almost 30 that have announced a sale for March.  Let me know if I can help or if you have any questions.

     I think it was cancelled in Harris county? The website said per the orders of Judge so-and-so. But thank you! 

    ANd yes I will look up your webinars. 

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  • Robert Sims
    Rental Property Investor · Sugar Land, TX · Member since 2013 · 113 posts · 27 votes
    5y

    I second the suggestion to follow @Arnie Abramson!  I met Arnie a couple of years back when he came to Missouri City!  A straight up honest man who knows Texas Tax Lien Auctions better than anyone!

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  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    5y

    @Cortney Arenstein  Did you go to the bootcamp?  What did you think?  Did they teach anything about Texas?

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