Buying a property with delinquent taxes

AllenArmory · Dec 19, 2016

I own ~40 acres in northeast Texas. The property next to mine (another 40 acres) has delinquent taxes and should come up for sale soon. The property seems to be owned by a number of decedents of an original owner, making the title less than clear. I have never seen anyone there in the last three years and it looks abandoned.

I'd like to purchase it but know very little about the process. Texas is a redeemable tax deed state, and I have read up on what that means. What I don't know is this:

- When I show up at the courthouse on the sale date, do I need to have cash on hand? If not, what is the timeframe I need to pay?
- If I win the auction, I realize that I probably won't get the property for just the back taxes owed. Are there any potential hidden costs once I pay the county? Is it possible that the property could have any other outstanding liens on it other than the back taxes?
- I have seen other properties listed in tax deed sales, and some of them have the following noted: "There will be no warranty relating to title, possession, quiet enjoyment, or the like for the personal property in this disposition." What does this mean? I could end up with no title to the property? No possession?

I appreciate any help from someone who has gone through this process. I tried contacting the county office, but they are slow to respond to my questions.

Thanks!

mddorange · Dec 19, 2016

I do not know about Texas, but here in Alabama a person can pay all back taxes for a property for 10 years.

At the end of the 10 years, a public noticed is published for the current owner to pay off the back taxes with interest.
If he does not in the allotted time, then the property is transferred to the person who paid the taxes for the ten years.

If the current owner does pay off the back taxes with interest at that time, then all that money goes to the person who had been paying the back taxes on the property.

That is why it is almost impossible to find any property here that has back taxes outstanding because someone is always paying those taxes hopping to get that property at the end of ten years or at worst, their money back with interest.

This ensures that the county is never short on their property taxes.

ch1ch2 · Dec 19, 2016

I have bought a tax lien property which was next to my property.
The following is my understand of how it works in Texas.
The tax authority sends out notices to the owner several times, then seizes the property.
The Sheriff posts notices in the local paper of the up coming action.
The Sheriff has an action of the property on the court house steps where it is sold to the highest bidder.
Once sold the previous owner has 2 years to buy it back with interest. (25% the first year and 50% the second year)
Once you buy the property it is yours with no leans.
A previous lien holder can only take civil action on the previous owner.
Most of the time once the notice is posted in the paper, someone contacts the owner and buys it from them before it is sold at action, if it is over 5 acres or worth much.

George2615 · Dec 19, 2016

Not sure about Texas but in my state if a property goes up for auction due to non payment of taxes. The County seizes the property and sells it at auction. ( It usually takes 3 years of non payment before the County takes the property). They previous owner has until auction day to pay all back taxes with interest or they lose the property and it becomes the Counties right to sell free and clear. The previous owner and / or relatives cannot bid or buy the property back at auction. The successful buyer pays an auction fee on day of sale (buyers premium) and has 30 days to pay their bid price. The auction announcement will have details on how long you have to pay. Some allow up to 30 days, some require full payment on day of auction. They then become the new owner free and clear. They then have to take the paperwork and record it at the County clerks office for the new deed.

In some cases there may be a lien on the property, here, the County discloses that before the auction and the buyer would have to pay that fee as well. They cannot sell property knowing there is a lien without telling you. Sometimes, properties with a lien do not sell at auction.
Here are 2 examples of County auction sales I went to:
1) I was high bidder on a 10 acre vacant treed lot for $5200. I had to pay a buyers premium and had 30 days to pay the balance. It didn't matter what the back taxes were. The County gets their back tax money from the sale. If back taxes are more than the selling price the County loses but that is usually not the case. I later sold trees off the property and made money, then resold the property for a bigger profit.
2) A gent sitting next to me bought a 5 acre lot with a house on it for $20,000. After paying the buyers premium and bid price he owned it free and clear. He made out good. An $80,000 house on 5 acres for 20K.
If planning on bidding on a property at auction its best to go look at the property before the auction to see what you may be getting into. In your case you already know. The next example shows what I mean.
3) A 1 acre property across the street from me was coming up for tax auction. I was interested in buying to put a pole barn on it. I checked with local codes department and found due to the property terrain and layout there was not enough road frontage and not enough set back from the road center line to build. Someone else bought it sight unseen for $500. expecting to build a house on it. They found out later they could not build on it and are now stuck with it. They've tried to resell the property several times without luck.

At some tax deed sales the prospective buyer has to do the research to find out if there are any liens on the property, whether someone is living on the property (then you would have to go through an eviction process), whether there are right of ways on the deed.
Your county should have a real property tax site that provides all the info you need.
Here, the County has a web site such as ____________________ County Real Property Tax Service.
the site could end in .com, .org, .gov

I hope some of these examples help but not sure if Texas works the same.

kenmac · Dec 19, 2016

For here, I've been told if you intend to purchase anything for back taxes to consult a real estate attorney. As there may be other issues preventing one from obtaining a clear title

ch1ch2 · Dec 19, 2016

A second property next to mine was similarly situated. The Appraisal District was going to take it on back taxes. The owner was going to sell it to me before the action date. The local banker heard of it and jumped in and gave the owner more money. The banker did not do that good though. He ended up paying thousands more in clean up costs than he had thought he would have to.
I had got a bid on clean up before I offered any money. 15K to 25K depending on the house removal. The banker thought he could do it for 5k.
I did not have any hard feeling over the deal. I even told the banker how to save money on the clean up. Bull doze a hole start pushing stuff in the hole and burn. Cover the hole when done. It wasn't that easy but that was the idea. It took 4 weeks with 2 back holes and 4 men.

davrow · Dec 19, 2016

Property is scarce in California. You hear about tax auctions all the time... but they rarely happen. If the property isn't totally bad someone always "works out a deal" before the auction takes place. Either with the current owners, the bank (if any liens are involved), or with the taxing authority. We planned on getting the lot next to us at auction, but a lawyer got to the bank before we did. They got it for $133,000 and were willing to sell to us for $225,000 (nice house on 3 acres). Don't just wait, get proactive or someone else will beat you to it.

turnkey4099 · Dec 19, 2016

kenmac said:
For here, I've been told if you intend to purchase anything for back taxes to consult a real estate attorney. As there may be other issues preventing one from obtaining a clear title

Excellent advice. Asking for legal advice on an internet forum is not a 'wise' way to make a decision.

I was involved in winding up as legal owner of an adjoing abandoned school property (approx 1 acre). It had been donated way back when the area was settled and should have reverted to the donee. Over hte years the heirs had proliferated so much that it was impossible to settle that way. I wound up paying a bit of back taxes and getting it fore "squatters rights". I had been maintining (mowing spraying weeds) for 7 years. Pretty mucnh a collusion between me, a former schoolboard member, a lawyer and the assessor. It was the only way to clear title on it.

AllenArmory · Dec 19, 2016

I wouldn't make a decision based solely on the forum. I have already contacted the county tax assessor and a realtor and will contact my title company about getting a title search done (they charge $250 for the search). I also have a real estate attorney that I used before I bought my current property that I can consult.

I was asking this forum since it gives me more information in making my decision from those who have been through the process. It's also a great way to get feedback from many people without having to wait days/weeks before someone calls me back.

Thanks for all the comments. I do appreciate them.