Tax Deeds: Why the sudden interest?

This morning alone, I have spoken to 4 people about buying property at the tax deed sale. Over the last 2 months I have seen a dramatic increase in consultations for the same subject. What’s the deal? Has there been a recent investor seminar on tax deeds that has sparked everyone’s interest?

According to the Florida Bar News, foreclosure filings are down by half which, by the way, is the exact opposite of what was expected once the foreclosure laws were changed making it easier for creditors to obtain a summary judgment. It stands to reason that if foreclosure filings are down, short sales are also down and so it REO inventory. Where is an investor to find inventory these days? Looks like people are starting to explore the Tax Deed Sale.

Here are some things to consider:

1. As of today, the Orange County Comptroller shows that at their October 23rd sale there will be 54 properties for sale.

2. The minimum bids on those 54 properties range from $2500 - $435,000!

3. I recently spoke to the Comptroller’s office and was told they have so many properties up for sale that there is a backlog of certificates being submitted. It’s taking 2-3 months to even get the properties up for sale.

4. The tax deed auction is still live – not online where you are competing with people all over the world for the winning bid.

Yes, the tax deed sale could be a treasure trove for investment inventory as long as you keep in mind the extra work required to make the properties “marketable”. By marketable I mean your ability to resale the property to an end buyer because an end buyer is going to require that you provide them with marketable title from a qualified title underwriter. All of the clouds on title are not, I repeat NOT, eliminated upon the issuance of a tax deed. So, how do you make your new tax deed property marketable and insurable?

As an investor you are likely picking up these properties as a “buy and hold” or a “flip”. Let’s take those two scenarios individually.

For a buy and hold acquisition you could hold on to this property for 4 years and the clouds on title will be eliminated after 4 years. Upon expiration of the 4 year statute of limitations you can sale the property with marketable title to an end buyer.

For a flip you don’t have that kind of time. Chances are high that your end buyer is going to require that you provide them with marketable title. The only way to do this is to hold it for 4 years (per above) or bring an action to quiet title (or something similar, but that is another topic entirely). A quiet title action will eliminate all those clouds thus “quieting” title.

A quiet title isn’t the cheapest legal endeavor in the world, but from what I hear, it’s well worth it considering the considerable discounts available at the auction. Also, the time frame to complete an uncontested quiet title isn’t that bad either – about 60 days.

So go ahead, buy some tax deeds, quiet some title, and sell some real estate!