Tag: tax

Tax Deed Sale Bidders (Money Wasters!)

Tax Deed Sale Bidders Kill Each Others Profits

Ha, Ha, I Wasted More Money than You!

Will These Tax Deed Sale Bidders Kill Each Others’ Profit?

At least these tax deed sale bidders can laugh about it!

Apparently, Don Hecht and Jim Dietz of North Dakota have run into each other before at tax deed sales, and helped each other pay more for properties at the sale.

In a recent article in the Grand Forks Herald, several bargain properties were bid up to several times their original starting bid.

A property starting at $6,070 was bid up to $24,000. A house in Manvel, ND started at an amazingly low $1329 and ended up at $8,000.

Another notable property in the sale was a 160-acre tillable farm that sold for $65,000. All to tax deed sale bidders who paid something approaching retail price for these properties.

I think it’s safe to say that if we had gotten in front of any of the former owners of these properties, we would have had a great chance at a decent payday. And this is in North Dakota!

The article went on to mention that the length of time of tax delinquency before tax sale in North Dakota has recently been reduced from 5 years to 3 years, and all properties on this sale were only 3 years delinquent.

In my article “Tax Deed Sales – A Way to Get Good Property?”, I describe the main disadvantage of tax deed sales – competitive bidding. This bidding almost always turns great buys into mediocre or even terrible buys.

This is all thanks to multiple tax deed sale bidders. But bidding at tax deed sales can be very good for us. Tax deed sale bidders creates “overbids” that are often due to the owner who lost the property, when they compete for properties.

We make a very good living locating and collecting those surplus funds for the owners who lost their properties. Most don’t know about the money and wouldn’t have the first clue how to collect it.

Did you think that Tax Deed Sales Create An Unexpected Profit Source, for tax sale bidders? Nope, it creates an opportunity for you.

Unfortunately, North Dakota doesn’t want to share and they do not let the owner get his surplus.

The county forecloses tax delinquent properties completely, without public bid, THEN auctions them off once the county is the owner!

Now why didn’t I think of that?

Get out in front of tax deed sale bidders to buy properties, then collect their overbids in many states. Learn more in 9 minutes than most tax deed sale bidders know, with my “Underground Tax Sale Secrets” report, below.

Indiana Tax Surplus Finders Die Quick Death

Tax Sale Surplus Finders Soon to be Extinct in Indiana

Another noble profession dies

Indiana tax sale surplus funds have led to some of the best opportunities in the country for collecting finder fees. The funds, created when more is paid for a property at a tax lien sale than what was owed, and available to the owner of the property upon the issuance of a tax deed, often went uncollected.

This created the perfect opportunity for finders to track down the claimants of these funds and earn a commission.

It is no surprise that most counties in Indiana have never made earnest attempts to contact the rightful claimants to make them aware of the funds, because the county gets to impound all funds on hand 3 years after the tax sale.

And, due to the nature of foreclosure property, most property owners were listed at the property address and never updated their address after they were removed from the property. So a letter went undelivered to the property, and that was it!

I outlined the process in my recent article, “Government Tax Sales – How you can Profit Without Attending Auctions”.  Smart tax sale investors have always used unclaimed surplus fund recovery as a legitimate way to increase their income while helping tax sale victims recoup at least some of their loss.

It appears that this industry will likely die this year, 2010, with the passage of updated Indiana tax sale code sections, especially in section 6-1.1-24-7 and 7.5

The two sections that put the “nail in the coffin” for finders everywhere?

1. Section 7.5 (b)1- Requires payment of compensation of not more than ten percent (10%) of the amount collected from the tax sale surplus fund – in other words, finder fees are limited to 10% from the moment funds are available.

A few adventurous souls might continue working at the 10% level, but this section will make it even more difficult to eke out a living:

2. Section 7 (c) 2 – Requires a court order for release of funds,  if the claimant is using a power of attorney or acquired the property by deed after the initial sale takes place.

While obtaining a court order for release of funds is not terribly expensive in most cases, there is already very little profit to work with, on only 10% commission.  The delays that this new code will introduce add the final insult.

The irony of the new regulation is that, while ostensibly to keep Indiana victims of tax sale from being “ripped off” by “bounty hunters” like ourselves, the change in rules will almost certainly result in LESS surplus funds being returned to the rightful owners overall.  The counties will no longer have the handful of finders, working on their behalf for free, to help return the funds due Indiana’s tax sale owners.

But they like it that way.  The decrease in collections that will result will lead to more revenue for the county.

If Indiana legislators truly wanted to ensure that the maximum amount of surplus funds reached the rightful claimants, they would stop worrying about finders and they would repeal the provision that calls for the funds to revert to the county after 3 years.

Why not send the funds to the unclaimed funds office so the claimants have a chance to collect them after 3 years?  That would be a tough one to answer for the politicians who just called for this “benevolent” change in the law.

Be sure to comment below – why would legislators make it harder for surplus funds claimants to learn about their surplus – and continue the clause that allows the counties to keep all surplus funds that aren’t collected quickly?

Postponed Property Taxes About to Kill Gary, IN?t

In my neighboring city of Gary, Indiana, tax rates are very high because of low-valued housing stock, a high percentage of abandoned homes, and a huge appetite for cash by the city government for such essential services as a “Human Relations Department” (which regularly hauls landlords before it to answer for racial discrimination).

Properties in the city already have a low value because of the quality of the neighborhood and the high taxes. In many cases, properties are just barely worth what is owed in taxes on them when they’re offered at the county tax sale.

Because of the high rents and insurance costs, rents often barely create cash flow for a landlord, even when a property is owned free and clear. For example, it’s not unusual for taxes and insurance to exceed $250 per month on a property that rents for only $450 per month. With AVERAGE operating expense for a home of 45%, this leaves a landlord owning such a property at a $2.50 per month LOSS even if the property is owned free and clear.

Delaying the Tax Sale

It should not be a surprise that with numbers like these, home values hover near zero even when a property is in rentable condition. Typical sale prices range from $4,000 – $12,000 on many homes.

And, typical starting minimum bids at Lake County’s tax sale auction for a house in Gary are $3,000 – $5,000 so there is little room for those bids to go up. Indeed, many properties are not even purchased at the initial sale for what is owed in taxes.  See my Article “Tax Sales – Essential for Every Community” to learn more about how delayed tax sales can quickly set into action a disastrous sequence of events.

When tax sales are delayed (recently, by a inept attempt to assign a market value to properties), more taxes are allowed to build up before the property is offered, rendering it absolutely worthless.

Nobody bids on the property, and a viscous circle ensues. More properties drop off the tax roll, increasing the taxes on the remaining properties further. This makes landlording or living in Gary even less attractive than it already is, and MORE properties exit the tax roll.

Rebuilding the City

Gary Indiana in the good old days

Gary, Indiana in Better Times

In Gary and other towns like it, the answer is not to raise taxes in an unlimited fashion to meet a city budget. If the city cannot operate with a reasonable tax rate of 2% or so of a property’s TRUE value (in Gary’s case, $200-$500 per year), some serious changes need to be made. With a reasonable tax rate like other cities in Indiana, Gary would attract many investors and find more and more of its properties back on the tax rolls with regular collections.

Luckily for the residents of Gary, their fellow Hoosiers have voted in a permanent 1%/2% tax cap (homeowner and landlord) of assessed  value for yearly property taxes.  With any luck, the properties won’t now be assessed for several times their true market value to make up the difference!

Gary Indiana in the good old days

Gary, Indiana in Better Times

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.