Property acquisition via back owed tax (An idea)

Hello All,

I was thinking recently and wanted feedback on this. If someone owed back taxes on a property lets say 20-30K, is it legal to approach them and say I am willing to pay off your back taxes for the title to the property. You would draw up a contract that would allow them to stay there as long as they agree to pay rent for the property. I would look for a property that doesn’t have a mortgage on it or any other severe liens. Now, some would say why would anyone sell their house just for the property tax while their house is worth more than that? Well I see houses goto auction that are worth more than what the back owed taxes are on that. So, I am trying to get to the owner before it goes to auction. What are the risks and pitfalls involved in this, has this been done before?

Thank you,

Jay, whatever you offer has to be framed as a solution or benefit to the sellers. This means being explicit.

The question you ask yourself is, “What benefits are there to the seller ‘letting’ you buy their houses for back taxes?”

Does it improve their credit?
Avoid foreclosure?
Avoid default on a loan?
Avoid a short sale?
Does it give them debt relief?
Does it give them cash?
Allow them time to move on their own schedule?

BTW, allowing them to stay and rent, is NOT a option you want to offer. Otherwise, you should just wait to buy as an REO from the county at a tax sale. If the bank has a loan on it, it will likely pay the delinquent taxes and call their loan due in the first place.

After you’ve determined the most obvious, pressing, ‘hot-button,’ stress-relieving, solution; offer that solution to as many delinquent property tax payers as you can, and start presenting your solution(s).

BTW, try to avoid putting yourself into a ‘selling’ mindset, where you’re trying to ‘convince’ someone to ‘let’ you do something.

That approach is dis-empowering and leaves you on your heels during negotiations.

Instead, consider what you offer to be an actual solution that a seller needs more than you need to give.

That way you disqualify sellers before they have a chance to reject your offers. That is accomplished by first getting prospects to call, and invite you to make an offer.

The next step is to separate the sheep from the goats by insisting that you’re only there to buy, not screw around. You ask if the seller’s ready to sell now, if you can come to terms.

“Selling” here means, “Getting your butt out of Dodge,” not renting the house from you, because somehow that is less stressful than just moving somewhere they can afford, such as Uncle Joe’s and Aunt Sue’s mobile on the south forty.

If not, the seller doesn’t get to find out what your offer is in the first place, and doesn’t get a chance to reject your offer. You remain in control of your negotiations with this approach.

John $Cash$ Locke (moderator here) organized my thoughts on this approach several years ago now, and helped me increase my closing rates.

I would suggest consulting your attorney before doing something like this. If you happen to convince a seller to accept this type of offer (especially if its an older owner) it can potentially bite you in the a$$ for taking advantage of someone not sophisticated.

What I’ve seen done which is a bit similar, instead of getting the title they got a very long term option on the property. The money you put out will be the option consideration and you of course agree on a purchase price. Downside, no monthly cash flow.

Jay Shah: I was thinking recently and wanted feedback on this. If someone owed back taxes on a property lets say 20-30K, is it legal to approach them and say I am willing to pay off your back taxes for the title to the property.

Yes, you can contract for anything you have the right to.

You would draw up a contract that would allow them to stay there as long as they agree to pay rent for the property.

VERY BAD idea…why would they pay rent if the cannot pay taxes?

I would look for a property that doesn’t have a mortgage on it or any other severe liens. Now, some would say why would anyone sell their house just for the property tax while their house is worth more than that?

Not going to happen…tax liens properties are normally NOT mortgage free.

Well I see houses goto auction that are worth more than what the back owed taxes are on that.

Taxes are normally a very small percentage of the propert value…nothng new here.

So, I am trying to get to the owner before it goes to auction.

You and LOTS and LOTS of other tax lien investors.

What are the risks and pitfalls involved in this, has this been done before?

INVESTIGATE before YOU INVEST…The water can be very deep and very dangerous.