Unjust Michigan tax deed sale system and others like it continue to rip off property owners
It probably doesn’t come as a big surprise to you that there was a big Flint, Michigan tax deed sale this year. It didn’t surprise me in the least. After all, Flint may be one of the hardest-hit towns in today’s economy, and real estate values and sales are reflecting that unfortunate reality.
But what really knocked my socks off was a partial listing of the EXTREMELY VALUABLE properties that went through this particular Michigan tax deed sale. These properties were worth anywhere from $400,000 to over $2 Million dollars according to a recent article about the tax deed sale on mlive.com – and I thought the title (“Gems Among the Junk: Genesee County gets Seven Properties Worth More than $400,000 Each”) was most fitting! Already, a number of lessons can be taken from this event:
- Extremely valuable properties can and do go ALL THE WAY to tax deed – resulting in a total loss by the owner.
- Millions of dollars worth of property can be up for grabs before the sale – and not just “war zone” properties – even with a Michigan tax deed sale.
- Any one of US could have had a tremendous, life-changing opportunity if we could have gotten involved with even one of the properties that ended up in the county’s hands.
- And – if you don’t happen to know much about the Michigan tax deed sale system – the government will keep all the spoils if you don’t get in front of that owner to solve their tax problem!
Counties Reap Undeserved “Michigan Tax Deed Sale Spoils”
You may have read some of my previous articles, like “Tax Deed Sales Create an Unexpected Profit Source”, where we talk about the owner being eligible to collect substantial amounts of money in the event they lose a valuable property. In most states, if a property with a 6- or 7-figure value went up on the auction block, it would bid well in excess of the taxes owed.
This would then create a surplus. A surplus is the amount the county collected above and beyond what they were owed, after auctioning the property at the tax deed sale. So while the owner of a property like the one you see above would probably lose the property forever, it would be likely that as a “consolation prize” there would be a large surplus that the owner could collect to make the whole situation more just.
Don’t get me wrong, though I feel badly for anyone who loses a property to tax deed, I agree that at some point strict action must be taken and this can include loss of ones’ property after an extended time. So I’m not against the whole tax sale system per se – in fact it’s what gives us so many opportunities to make a great living even when the real estate market is down. The surplus being available to the owner is a sort of “check and balance” to help make the situation a little more just for the owner losing a property to a tax deed.
We even create another profitable business connecting people with their long-lost surplus funds for a contingent finder fee (see some of the hundreds of checks our trainees have obtained at our Hooked on Overages Site!)
How About Some Checks and Balances in the Michigan Tax Deed Sale, and Others Like It?
What I DON’T agree with is government deciding that at some point the taxpayer’s property became THEIRS. 100% theirs. Despite the fact that the taxpayer likely owes only 5-10% of the property’s value in taxes, states such as Minnesota, Wisconsin, Michigan, and Oregon want more. In fact, they want it all. So they foreclose the property completely, and they make sure to do it well ahead of the tax deed sale. Now, because of a relatively low tax bill that was owed, they’ve become 100% owner and wiped the owner out.
But, as usual in most tax deed states, they let the bidding go wild several months later at the tax deed sale. And the county loves it – because THEY now own the property, and as such THEY get all the surplus funds from the sale! And the owner is truly left blowing in the wind with NOTHING.
I wanted to write about this today not to complain about government – in my opinion that will get you nowhere. Rather, I want you to see the HUGE opportunities that exist in these “backward” states to snag tax sale property BEFORE the county can get their hands on it. Remember – by the time a tax deed list comes out, there is only one owner and they don’t sell except at auctions! Take a little time and delve into the FORECLOSURE process that the county performs prior to the sale and you will find a wealth of properties that nobody but you has access to.
Finally, make sure the owners realize that the final date to redeem their property may come and go with as little as a notice in the mail – no big auctions or evictions when that day passes. The big Michigan tax deed sale windfall will be savored by Uncle Sam (or rather his local counterparts) several months down the road!
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Sites That Link to this Post
- Michigan Tax Agreement Sale Involves 3000 Owners | My view on taxes | December 2, 2011
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- Michigan Tax Deed Sale Has Effects On 3000 Owners « Property taxes | December 2, 2011