Properties with delinquent taxes

Foreclosures, Short Sales, Tax Foreclosures
1

I am very new to the investment game so please forgive me if my question post is a little naive sounding.

I have a certain geographical area that I am focusing on in my metro area for investment properties to wholesale. What I have found is that a number of them owe delinquent taxes according to the asessors office. Some are under suit and some are not. That to me would be an indicator of someone with financial difficulties that could translate into a motivated seller.

What are the pitfalls of trying to put these types of properties under contract. Are there any tips or pointers in trying to work with these properties?

2

You will most likely have to get the taxes caught up to acquire the property. With that being said… you are absolutely correct in your way of thinking. There is a local investor that I worked with for awhile and he did exactly what you are doing. Looked for people that were delinquent on their taxes and narrowed his search fropm there. He then narrowed by school district. From there it was under 100K purchase price. Then it was proximinty to 200K properties until he had a list a a few houses that fit his niche perfectly. Then he would approach the owners of the properties with cash offers and see which ones bit.

3

Thanks for the reply. Do you know if he were able to roll the purchase funds into some sort of escrow account that could then go directly to payoff the taxes, or is that a totally separate transaction that needs to come first from another source of cash?

4

The taxes are typically paid at closing.

5

The title company releases the proceeds directly to the tax department

6

along with any other things like liens and judgements

7

Good observation - folks who are behind in taxes certainly are under some sort of financial stress.

It isn’t cheap to let them fall behind. Some municpalities penalties are as high as 50%! Most are anywhere from 12 to 18%. So you know you’re dealing with somebody with SOME motivation.

Anyway, you don’t really need to be too concerned because typically, if you buy and close through and attorney or title company, they will make sure the taxes are paid and current when ownership transfers (they’ll be paid out of closing proceeds)

That said, some properties back taxes won’t be made up and they’ll eventually be foreclosed by the taxing authority. This is where you can get some really, KILLER deals for (literally) pennies on the dollar.

As the economy continues to crumble under the current Administration, look for more opportunities in tax defaulted/delinquent properties.

8

Caveat emptor-I’ve heard some HORROR stories from investors that have tried to buy props with back taxes on them and while they THOUGHT they had purchased them and caught up on the back taxes, the city ended up foreclosing on the properties in the meantime with little to no notification to the owner as to what their rights were under the law. Miss one court date and you’re up a creek without a paddle! The same investor then had to pay a couple grand for the right to go up before the city council to appeal the city’s foreclosure! Lots of hoops to jump through! Hopefully its worth it.