"The owner of a 4/1 home is 2 years behind on his property tax and can't afford to pay it. I offered to write up a contract where I will pay the taxes owed and set up a payment plan with the owner. If he is in default of the agreed upon terms, then I will gain title to his property."
What is the best way to structure this deal? What documents are required to finalize this deal?
So are you just loaning him the money for his taxes? If not must county's have already sold the tax certificate after he was late after the first year. I would check with the county to get the full details before signing on the property.
What you are proposing is a mortgage ( a loan with the property as collateral). You cannot simply take the property if the owner is in default. There are rules regarding mortgages that prevent this. You would have to go through a full foreclosure to acquire the property. If you don't do all the paperwork for the mortgage properly up front you may not be able to foreclose.
You get points for creative thinking but this idea isn't very practical in today's regulatory environment.
This loan will cover the taxes owed along with any interest to the certificate holder. Based on Ned Carey's comment, I am trying to do my due diligence and find out what paperwork is required to ensure the deal is done correctly. Please advise
The cost to foreclose will likely be as much as you are lending. You need to know if there are any other mortgages or liens against the property of judgements against the owner. All of these will come before you in the event you foreclose. So for example if their is a mortgage already you may own the property but the prior mortgage still needs to be paid. In most states if their is a judgement against them personally, like for an unpaid medical bill, then that has to be paid before you have clear title.
You will need an attorney that specializes in mortgages. Presuming this is owner occupied you may have a tough time finding an attorney that will handle this. If it is not owner occupied it can be a commercial loan and then the regulations become much less rigorous.
@Pamela Holmes what is the seller's story? How did he get behind on his taxes in the first place? Why wouldn't he fall behind again? Is this house just too much for him? Is he willing to move? What is his greatest fear? What would he like to see happen in a perfect world? Does he have a mortgage? How many years are left on his note? What are his monthly payments?
Probably the best way to structure this is to buy the property from him altogether. If he wants to stay, you could lease it back to the seller, perhaps with the option to buy at some future date. In this case, if he did not perform on his payments, you could evict him, rather than foreclosing. I think this is what you were asking about in the first place.
That being said, there is a lot of unanswered questions. I don't know enough to say whether this would be good deal or not, but I assure you there is more to consider than just the back taxes.
A title search would tell you about other outstanding liens and encumbrances. A rent survey would give you some idea about the viability of holding this for cashflow. If your seller has the means to make his payments, you may want to wrap his mortgage (which is something of a tweetable topic in its own right) in order to secure long term financing.
Does this help? You CAN do this, but until the other questions are answered, I can't say whether you SHOULD do this. Let me know if you have any answers or other questions. I'd love to help you.
All the best
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