Help, I have a wholesale deal with taxes owed on the property how do I structure it for the buyer and the seller
Hello I am fairly new to wholesaling and i have a potential deal that has back taxes owed on it, however since i know that the buyer may be able to talk to the city and get the taxes reduced should i just write the contract to the seller for the difference, then market the deal to a buyer with the lien included in the purchase price and making note of it in the break down that the extra amount is due to the back taxes on the property and if they call city hall they may be able to get them reduced?
@Rod Coleman I have found buyers seem to be unwilling to pay back taxes they didn't incur. Even if the numbers are good I find it to be a harder sell for some reason. I just close on the property and then sell like a traditional sale and it seems to work well. Then if its a great deal we may just rehab it ourselves.
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I would make a call to city hall and give them the hypothetical. If a new property owner comes in, what is the process or likelihood of the back taxes being waived or reduced? How does the city normally handle it? Just making a call and removing as much uncertainty as possible for your buyer could pay off well for you @Rod Coleman !
@Rod Coleman If the deal has enough meat on the bones, including paying the back taxes, you should set up an assignable contract that says the buyer, you, will pay the back taxes. You can then advertise the deal w/ a price and indicate it includes the back taxes. If you don't get any bites then consider following @Jeremy Tillotson advice. Buy it yourself, pay the taxes, then sell it as a traditional sale.
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there is enough meat on the bone when i calculated the back taxes into the mix on the sale side. the owner knows the taxes have to be paid so she know that this is what is going to kill what she receives so just write the contract to her at her price she wanted to walk away with plus enough for closing cost she she will have to pay. tell her it may take a lil longer to close on it so at some point i may need an extension on the contract. then call city hall and inform them that i looking to purchase a property that has back taxes owed on it but the amount of back taxes is to much for me to buy and fix it and get the property producing again tax revenue again. when i get word from the city then market it?
I would get my numbers first and then see what left.
when i ran the numbers it works, only if she takes about 1600 less then we originally wanted
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The property taxes will Not be discounted, get that idea out of your head. Just make the owner aware they will be deducted from her proceeds at closing. There's either a deal there, or there isn't.
Originally I never had the idea of getting the taxes reduced, that was an idea another person from BP told me was an option. however like stated above, when i ran the numbers it works she just has to take a slightly lesser amount. but back to my original question, do i put the put purchase price on her contract meaning the full offer for her to get paid. then tell the buyer that the seller will pay the back taxes with her proceeds and some of the closing cost?
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No. All existing debts...mtg, taxes, water, etc. get paid off by the seller at closing. This is the normal, cleanest, least confusing way to do it.
- So when i structure the deal with the seller give her what my numbers say and just inform her that she will receive less the owed taxes. Also should i let her pay the closing or let the buyer pay the closing? Also do i need to put that in the contract that she agrees to pay the taxes off with her proceeds.
@Rod Coleman - I would make sure to work the closing costs into the buyers side to make it easier for the seller. Also, yes - just write the numbers you are willing to pay and her back taxes would be deducted from the proceeds.
Originally posted by @Wayne Brooks:
The property taxes will Not be discounted,
In Baltimore city it is possible to get taxes reduced if the seller accepts nothing for the property.
get that idea out of your head.
Yup even though I know it can be done and I specialize in tax default properties in the city, i have never done it. Too much hassle for too little return.
