Structuring a deal with back taxes

8 Replies

While wrapping up some business on a house in Detroit last week, I came across a SFH in a B neighborhood that interests me. It has fallen victim to a few of the typical things in the area (windows broken, damaged door, etc.) The back taxes are about $4k and are showing as delinquent but not yet subject to foreclosures. I found the owner information on Property Shark and want to see about picking it up as cheaply as possible ( hopefully just the back taxes). What would be the best way to structure the deal? The property owner is in Houston, TX and I am in Dallas/Fort Worth, TX. Would Texas law be used in the offer/contract or Michigan law? Thanks for the help! As for the numbers, the owner paid just over $12k in 2012. Rehab costs would be about $40k and ARV would $90k-$120k based on comps.

contact the owner...I'm not sure but am guessing since said property is in MI that is where the laws will govern...  I'm not sure what you mean by structure the deal?  Since its 4k behind on taxes you will need to pay those and doubtful they will let it go for that...You never know unless you try!  Good luck!

Thanks Kyle. I guess I was wondering whether to try to do the deal as a "subject to" with the back taxes or if there might be a different way that BP users might recommend?

Originally posted by @Bill Tyler :

Thanks Kyle. I guess I was wondering whether to try to do the deal as a "subject to" with the back taxes or if there might be a different way that BP users might recommend?

 Subject to would require a loan to be on the property. If there are very delinquent taxes, it may not have a loan on it. If you can give me an address, I can tell do a cursory check to see if it has a lien. If it does not have a lien, and it is just backed taxes I would send them a direct letter and try to get the home for the back taxes + a little extra.

Thanks Joshua. It is a mortgage free property. I will just need to find out if there is an outstanding water bill that might have cause a lien. Last time I dealt with the Water Dept it was a huge hassle.

If you do a subject to I recommend getting title insurance.  You never know if there is a contractor lien, IRS lien, or any other million scenarios of a clout in the title.  

Originally posted by @Joshua Woolls :
Originally posted by @Bill Tyler:

Thanks Kyle. I guess I was wondering whether to try to do the deal as a "subject to" with the back taxes or if there might be a different way that BP users might recommend?

 Subject to would require a loan to be on the property. ...

 Ah, a misconception. The most common item taken "subject to" is an existing mortgage - but that is not the only thing. A deal can be subject to easements, code violations, mechanic liens plus other matters. In fact, "subject to" wording can even be found within contingencies. 

The proper jurisdiction governing any real estate transaction will be the state where the property is located, not where a contract may be created or executed. 

As Steve mentioned, you could buy subject to the taxes, but why? Title insurance won't cover that, you need to clear the taxes before any loan can be obtained for rehab and I wouldn't rehab a place with tax liens pending, involuntary liens have a way of discouraging others to get involved, contractors, material suppliers, lenders, not to mention that taxes may need to be cleared before a building permit might be issued! 

Consider seller financing with enough to clear the taxes at closing. You can close in Texas, by closing in escrow through a title company where the property is located and that will be in accordance with MI. law. Good luck :) 

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