I am not understanding Tax Deeds or I just live in a land of ultra inflated prices!
Recently, I found 2005 information about a tax deed sale in a town near me. The auction stated that taxes, interest and fees brought the starting auction price of a given property to $67,000. (It was struck to inventory.) When I look online at area property values for this home (address was provided) comparable neighboring homes were valued at $670 -$900K.
Using the above as an example, I would expect to have some repair expenses, legal fees to quiet title, carrying expenses, and selling expenses (commissions, closing costs). If I sold the house at an attractive $500K, I would would consider a $300K profit a reasonable expectation.
This past week, I participated in a teleconference conducted by the Learning Annex with Ted Thomas. He had testimonials were his students were stating they realized $20K - $40K profit on a property.
What am I missing here? Why are their profits so low? Are they satisfying junior liens or just not trying to get listener’s hopes up? - Help!
I don’t understand and would like to hear from those who have done these transactions.
I haven’t purchased a tax deed myself, but I understand how they work in my state(Missouri). When you buy a tax deed, it’s very likely there are still other junior liens on the property. In your example say you bought the tax lien for $67,000 and their was a first on the property for $200,000. When you go through the waiting process and eventually try to foreclose, the first lien or the owner will come up with the $67,000 and pay you off, rather than let that much equity be lost.
The case where people are making $20K-40K is more realistic because owners and banks may walk away from that much equity because it’s not worth the hassle.
Thanks for your response. In the case of the $67,000 tax deed, the people had passed on. The property was struck to inventory of the town since no-one bid on the auction.
Tax liens are supposed to take precedent over ALL other liens.
As to my opinion on paying off junior liens: I would think it fair to pay off liens specific to the property - either a mortgage or a mechanics lien for a repair that I am now going to enjoy. I could not see satisfying a lien for something like a hospital stay. After all, it is not my fault that the previous owner didn’t pay their medical bills.