A contractor who does some work for me is behind in his property taxes and his house is set for Tax Sale at the County. He says his house is paid off and is worth about $200,000. His tax bill is $4000-$5000. I have the funds available to cover his taxes. Is there any creative things I can do to cover his taxes and protect myself so that I get paid back? Not sure I even want to get involved, but if can help him out and protect myself (and even be compensated) then I may consider it. Any comments are welcome.
Ron
If your contractor is behind in his prop taxes, and his home is set for the tax sale, there is not much time to waste.
his house may be paid off, but that is really of no importance…
yes, there is creative things that you can do to cover his taxes and protect yourself… when you purchase the tax lien, you are always guaranteed your monies back in return, or the property in rare instances…
first of all… who is this “contractor” who is behind in his prop taxes???.. and why has he allowed his prop to be set for tax sale??? (( usually it may be ignorance or apathy ))
if his house is worth $200,000… why can’t he come up with the needed $4,000 (( skeptical in my book ))
My avenue would be to purchase the lien on the home… if it is paid off (I still make monies)… IF IT IS NOT (I own the house) … not too much too loose
Good Luck
Thanks for the reply. First, maybe I used the term contractor loosely. He mainly works as a sub and is not the sharpest knife in the drawer, but he does do good, inexpensive work on my rentals. Not sure how he got behind but most likely poor money skills.
I have never dealt with buying Tax Liens and have no idea how they work. Would I be bidding against other investors? I always thought at a tax sale the property was bought out right? My thought was to loan him the money and use his house as collateral. I would have enough work on some remodeling jobs for him to do to pay me back.
And yes there are some red flags. I would certainly gather more information before doing anything.
I commend you on your initial research…
a lot depends on what state you are considering investing in.
where are you located??.. it differs from state to state.
what state are you in??
the answer to that is the first place we should start…
thanks for the reply
the first thing to note is that PA is a TAX DEED state…
this means that - your associates property (if it goes to tax sale) will be auctioned off with the starting bid being the total amount of unpaid taxes (plus any fees)
they don’t do tax liens in PA like they do in many other states…
You (or the owner of the property) reserves the right to pay the delinquent taxes right up to the date of the auction… if you can work out a solid agreement with the prop owner (as to your benefit of paying the delinquent taxes)… then it may be a benefit to you to pay the $4-5,000… as long as there is something in it for you.
if you do decide to help him and pay the back taxes, you will be saving him from losing his home at the tax sale auction… this should warrant a reward for you, and is really up to the discretion of the prop owner.
If nobody pays the delinquent taxes, and the prop. is allowed to go to the tax sale…nobody really wins… because there will be most likely be several other investors at the sale willing to bid 20-30-40 cents on the dollar to PURCHASE the prop. with no chance of the homeowner to redeem…
I think you’re best bet is to consider options for you’re associate to redeem the prop. prior to the sale… if this means that you put up some monies out of you’re own pocket - then a mutual agreement should be worked out to compensate you for your helpful actions
Good Luck
Thank you for your help!!!