Tag: properties

Tax Sales – Essential for Every Community

Tax Sales are GOOD for the Community

Tax Sales are GOOD for the Community

Tax sales allow us to make our living – but they are also essential for every community’s health.

Each year, a certain number of properties “fall through the cracks” – the owner becomes unable or unwilling to do what’s necessary to keep their property maintained – financially for sure, and physically as well in most cases.

Perhaps the owner dies. Perhaps he or she moves out of the area and gets busy with a new life. Maybe an heir receives the property and that person just isn’t meant to own property.

Sometimes banks even start foreclosure proceedings against a property and never get around to finishing the foreclosure. Without a mechanism to clear out the dead wood in a community, we would find a growing number of “orphan” properties that would just sit and rot.

Tax Sales: Necessary Evil?

Many people think of tax sales as an evil – after all, poor innocent homeowners have their hard-earned homes “taken away”. Rarely is that the case.

Rather, tax sales are often the rain that washes clean the community each year.

The properties sold at the sale are usually purchased by investors who, in exchange for receiving a good price for the property, proceed to fix up the property and return it to life.

These properties then return to the tax roll, and reduce the amount of property tax burden that everyone else has to pay.

In fact, there can be disasterous results when a community holds off its tax sale for even one year – especially a community that’s already teetering on disaster.

This really makes our mission of contacting tax-delinquent owners not only a profitable, but NOBLE cause. The sooner we get these properties into the hands of a profit-minded individual (another investor usually) or a caring homeowner, the faster the community improves and recovers from the lost tax revenue that this delinquent owner causes.

When Tax Sales are Delayed

It would seem to be no big deal when tax sales are delayed for an extra year or two to “give homeowners more time”. But in reality, this is very harmful to the community, especially a low-income community. This extra time actually causes the tax burden on many properties to exceed their market value, especially if the properties are in run-down shape.

This means the properties will not be purchased at the next tax sale, and may remain off the tax rolls for years, or even forever! Properties laying around vacant are no good for the community or the county coffers.

By pursuing tax-delinquent and tax sale property before tax sales occur, you are helping to maintain your community that much faster.

Government Tax Sales – Profit Without Cash

Government Tax Sales – The Hidden Bargains

There are actually several different ways to profit from government tax sales. You can avoid attending auctions, bidding against others for properties, or waiting for tax liens to mature completely. More in a second.

In order to obtain properties directly from government tax sales, you will need to do a significant amount of research on the properties being offered. Then you’ll attend a sale where you will need to pay all cash for properties that you generally cannot inspect.

In addition, you may have to bid much more than the minimum advertised price to actually get the property. For tax liens, you’ll wait many months or years to have a chance to acquire the property.

Let’s look at some ways you can profit now, without attending government tax sales, investing cash, or waiting.Government Tax Sales and Immediate Profits

The first opportunity is to get out in front of actual government tax sales by requesting a listing of all tax-delinquent properties in the county you want to work.

These tax-delinquent listings can be anywhere from 1 day delinquent to several years delinquent. Either way, the properties have not been offered at a tax sale yet.

Start with the properties that have been delinquent the longest, and also those with owners who live out of the area. These properties are prime candidates for a bargain purchase.

Many times, and out-of-area owner who is delinquent may not even know about the delinquency because they have basically forgotten about the property. The property may be run-down or may be occupied by family members who are not paying the owner.

You can get properties like this under contract and resold to an investor before the government tax sale occurs. And walk away with a nice profit with no risk.

Or you can sometimes buy these properties outright for a very small token payment to the owner. Then quickly resell before a sale on the property occurs.

This way you’re using some of the purchaser’s money to redeem the taxes, and then the rest is yours.

Getting Started with Government Tax Sales

Watch for government tax sales to be announced, and acquire the list of properties about to be auctioned. These owners will lose the property in a matter of months or even weeks.

A sense of urgency is now created to do something with the property. One technique is to “partner up” with these owners.

This can mean either redeeming the property and reselling it some time later, or reselling it immediately to an investor. You can even arrange to split the proceeds with the owner instead of paying them anything upfront.

This way the owner gets something for the property and you profit with minimal investment.

You can even profit from government tax sales in many areas even after the sale takes place and the property is lost to an investor.

This is because many areas have a bidding method for properties, where the county can take in more money on the sale of the property than what was owed. For example, a county may auction a property for the amount owed, $5,000, and receive $25,000 for the property at the sale.

The extra $20,000 that is collected above and beyond what’s owed is usually due to the former property owner. You can look up the results of past government tax sales and see which properties generated surplus funds like these.

Then, you can negotiate with the owner to receive a finder’s fee for money the owner didn’t even realize was theirs! For full details, see our course, “Hooked on Overages”, available here.

These are just a few of the “side opportunities” that government tax sales can offer, without risking money at the actual sale, bidding, or waiting.

In fact, as I showed you in the finder’s fee example, we can even use the competitive bidding aspect of some government tax sales to our advantage by helping owners recover funds due to them.

Discover these, and other insider techniques you can use at government tax sales, in my “Underground Tax Sale Secrets”, available below.

Tax Deed Sales – A Way to Get Cheap Property? Not Usually

Tax Deed Sales and Cheap Property

Are tax deed sales an effective way to acquire property for bargain prices? The short answer is: hardly ever. Let’s look at a few reasons why purchasing property at tax deed sales can be problematic.

The first obstacle you’ll encounter is that you will have to research each and every property on the tax sale list. In many areas, hundreds or even thousands of properties can be listed on a county’s tax sale list. When there are this many properties listed, it becomes a huge expenditure of time to drive to each property (if you can even find some of them without an address) and assess a value you’d be willing to pay for each one.

Tax Deed Sales - Bidding Ruins the Fun

Bidding Kills Bargains At Most Tax Deed Sales

Also with a large list, there will be mostly garbage properties available that will not even be worth the taxes owed. It’s easy to confuse an adjacent lot, next to a valuable property, with the property you’re looking to bid on, and make a bad purchase.

Now that you’ve spent hours researching the properties, you’ll have to have cash available to purchase the property at the sale. Don’t think that the amount listed in the list is necessarily what you will be able to purchase the property for – – this is just the minimum bid.

At the sale, you’ll be joined at most tax deed sales by several other bidders with deep pockets. They’ll almost always bid the property out of the bargain range and closer to retail value.

The last significant item is that most properties purchased at tax deed sales do not have marketable title at the time you buy them. Though any mortgages or liens are usually wiped out by the tax sale process, title companies want an additional step performed, called a quiet title, which can take 3-4 months and cost an additional $500-$2000 to perform. Many times during the quiet title process, interested parties who were not sufficiently noticed about the sale will come forward and attempt to overturn your deed. This is the whole reason the title companies want the quiet title done successfully – – they have been burned too many times by insuring tax deeds bought at auction.

The only way you will succeed at tax deed sales in buying a cheap property, is if you manage to attend an auction where nobody shows up, or everybody who does show up misses a valuable property on the list and does not bid.

These experiences will be few and far between, and you’ll have to research all tax deed sales in the meantime to be prepared in the event you get lucky.

However, tax deed sales do present a great investing opportunity. You can simply contact the owners of property going to tax deed sales and buy the property directly from them. Much of the time, the reason the property is going to tax deed sale is because the owner doesn’t want it. In these circumstances you can offer the owner as little as $50 for the deed to the property and pay the amount owed in taxes, with no quiet title or bidding necessary.

Tax Deed Sale – It Can Happen to the Best of Us

Tax Deed Sale for Paul’s Property?

Bad things happen even to good people, including an unwelcome tax deed sale.

Take Paul Sosnowski of Bethel Island, California.

First, in 2008, a storm did almost $2 million worth of damage to improvements on Mr. Sosnowski’s property. Then, the real estate market crashed, leaving him with 62 lots, each complete with its own boat slip, and no buyers.

According to a Contra Cost Times article (http://www.contracostatimes.com/real-estate/ci_16535310?source=most_emailed&nclick_check=1), “Sosnowski found himself the No. 4 biggest defaulter in Contra Costa County on its Sept. 1 published list this year. According to the tax collector list, he owed $238,680 in property taxes on 15 defaulted properties.”
Unexpected tax deed sale owner

So here’s an apparently honest businessman who finds himself the 4th biggest tax defaulter in a California county. And owning many properties on the way to tax deed sale.

If this situation could happen to him, is it that hard to believe it can happen to a “regular Joe” property owner?

The answer isn’t to buy these defaulted properties at the tax deed sale. See why this doesn’t work in my article Tax Deed Sales – A Way to Get Cheap Property? Not Usually..

The best way? Approach the owner to buy the property. You’ll often find the owner has given up or just wants to get SOMETHING out of their property.

You can offer to cure the tax deed sale by paying off a relatively low amount of taxes. Or if you don’t have cash, you can keep the property out of the tax deed sale by flipping it to a buyer who DOES have cash.

If you read the article, you see that Paul has worked out a pay plan with the county, so he’s safe for now if he can keep the back payments coming in. A rare tax deed sale “happy ending” indeed.

A lot of others on the tax deed sale list WILL NOT have his resources (or resourcefulness) and will need your help to salvage something from their property. Discover alternative (and better) ways to profit from a tax deed sale below – with my Insider’s Guide.

Tax Lien Sales: 5 Deadly Traps Lurking Just Below the Surface

Tax lien sales: 5 traps

Tax Lien Sales: Not for the Novice

Attending tax lien sales seems like a great way to get bargain property – and in rare cases it can be. Tax liens certainly offer a decent return on your money. In many cases, you’ll earn up to 25% APR or more.

On the surface, it seems like a win-win situation. You either get a bargain property, or at worst, get a great return on your money.

As someone who has attended many tax lien sales in the past, however, I can tell you that there are some traps you may not recognize until you jump in:

Make sure the actual return you stand to make will be worth your effort. Over 95% of tax liens redeem before the underlying property can be acquired.

Therefore, you must be satisfied with only the interest you stand to make from your investment. And there is a substantial effort required to investigate all the properties on the tax lien list.

If you’re investing only a small amount of money, like $10,000, you will only earn perhaps $1,000 on your investment if all liens pay off. You may have to invest at least $1,000 worth of your own time investigating properties before the tax lien sale, bringing your real return down to zero.

Don’t forget about legal costs associated with acquiring properties. You may need to spend several thousand dollars with an attorney providing notice to the owner and perfecting your deed to the property. In many cases these costs can be more than you spent on the lien itself!

At many tax lien sales, properties with city code violations will be offered. It’s important to check all properties on which you may buy a lien, at the city building inspector before purchasing the lien.

The property could be demolished by the time you acquire it, and/or you may have to immediately deal with the city upon acquiring the property. You’ll want to avoid this or bid accordingly.

Plan to potentially wait much longer than just the redemption period to get your deeds to properties from tax lien sales. It can take several months to a year to get a court date to request your deed and wait for the county to issue the deed.

Then you will almost always have to perform a quiet title action to get martketable title to your property. Factor this in when bidding!

Don’t forget about other bidders attending the sale. In a few states, the price of the lien is bid up until a winner emerges.

In these cases, make sure to set a maximum price you’re willing to pay. In other states, the interest on the lien is bid down – on good properties the interest rate is often bid to zero.

Still other states have a random system for choosing who gets to buy a particular tax lien if several bidders are interested. No matter what the system, establish what you’re willing to pay for a particular lien, and stick to it. You may not be able to buy the exact liens you want and may need to have some alternates picked.

After being a tax sale investor for over 10 years, I can tell you with certainty that tax lien sales are not for beginners or those with only a small amount of funds to invest.

They are dominated by experts who have hundreds of thousands, or even millions of dollars to invest, and who are able to make a significant return from interest because of the large amount of money they have access to. Property acquisition is a very small part of the allure to investing at tax lien sales.

Most new investors investigate tax lien sales as a way to pick up property for a tiny fraction of its value. They are soon disappointed to find out that all of their liens redeem and they are left with a small amount of interest.

However, tax lien sales create a way for us to acquire cheap properties without even participating in the sales – we can simply let the other tax lien buyers fight over the liens, and then close to the redemption period ending, we will look up which liens remain unpaid.

Then, we’ll contact the owners of those properties directly and get the property under contract! Most properties in this situation are free and clear, and are unwanted by the owners. Some will sell for as little as $50 just to get the property out of their name.

Now, we don’t have to worry about investing our own money, legal costs, or code violations (we’ll just pass if we find any, or deal with them).

We don’t have to wait for a redemption period to end, since we’re looking up past tax liens that were already sold. We don’t have to compete with other bidders, or do a quiet title action on the property. Much better.

Get my guide to working tax lien sales a smarter way (below) – “Underground Tax Sale Secrets”.