Buying a property with delinquent taxes

[PILOON]

As far as I know, if there is a mortgage the bank will pick up taxes simply to protect their loan.
In my area, Quebec, they hold an auction after 2 publications in local papers.
Highest bidder wins and property is basically in escrow for 12 months, Debtor has option but the bidder gets 10% for his trouble.
In my area we have a 'welcome' tax which the debtor has to pay all over again.
Often the city will be the buyer hoping to later make a profit, especially on vacant land.
Those auctions are cash only or CC.

A winning bidder is allowed to make any essential repairs to which the debtor has to re reimburse along with the premium should debtor opt to reclaim his property.
(suspect there could be abuse here and disputes as well)

 

[TSE]

Sounds like you're doing your due diligence well. I've been through this in Texas within the last 2 years. Because my recent deal was raw land, the debtor had only 6 months to reclaim the deed. He didn't so the property is now mine. Homesteaded land gives the debtor 2 years to redeem if you are paid back as stated previously. As was also said for another state (or Canada maybe), in Texas, you are allowed to make necessary repairs (like fix a leaky roof) and if redeemed you will be reimbursed. But if you go building a new house, you may have just built it for the previous owner if they redeem the deed.

As far as clear title, you're doing what you can with a title search. You won't get title insurance from anyone from what I found, but their search is basically the same search they would do if issuing title insurance. That and the fact that the law firm used by the county is searching for and naming all potential owners/heirs in the lawsuit to claim the property for the county, you should be fairly confident if they don't find anything. The exception being smaller nuisance liens made by enterprising folks who know the property is being sold at tax auction. Vacant land is very unlikely to have that problem compared to a house.

Take all of this with a big grain of salt because the lawyer you hired should be able to tell you way more than anyone here (me too of course) and maybe even correct a misconception or three. Good luck. And don't forget about the likelihood of bad blood for acquiring real estate in a tax auction.

Oh - most importantly, yes I had to pay them right then minutes after the auction was complete. The county accepted a personal check. From what I understand, this is unusual.

 

[Gem99ultra]

I've bought quite a few lots/acres in the past in Polk County. BUT - I didn't buy them at the auction on the courthouse steps, as is the most common method. I waited until a few months after the auction and submitted a sealed bid to the county for parcels that were not sold. In every case, the county was more than happy to accept my bid since their main objective was to get the property back on a positive tax roll.

In every case the taxes were many years past due with the tab running way more than I was willing to pay for the unimproved land. Best I've done, an that was 8 years or so ago, was $200 per acre. Obviously, that established the taxable value, leaving a very minor tax bill every year afterwards.

But - to answer your direct question, yes you do either have to have cash-in-hand or a pre-approved payment plan before the auction; every county has their own requirements which should be available to you online.

Secondly, the previous owner does have a period of time to reclaim their property. They are required to reimburse you for the cost and improvements. In Polk County the time frame was 6 months. I made it a point to NOT do anything with the property before the time frame expired. I certainly wouldn't be building a house or any other major projects on it until it was clearly mine without the possibility of being reclaimed.

Disclaimer: I am not an attorney nor a realtor. My experience does not establish laws nor practices for any government jurisdiction.

 

[AllenArmory]

Update: I have spoken with the attorney employed by the tax assessor-collector, who told me this:
- The full amount of the sale is due that day. In order to bid, I need to have a letter of intent from my bank up to my max bid that says I'm good for the money.
- There is a 6 month right of redemption (this is Texas, btw). The property owner would pay me amount of sale + 15% if they wanted the property back.

I also spoke with a person at a title company, who told me this:
- Tax sales wipe out any existing liens on the property (bankruptcy, child support, etc.), except for federal liens.
- If the there were any federal liens, the feds would probably have taken the property by now.
- I could hire the title company to do a search for me, but it probably won't reveal anything that the county won't find.

 

[AllenArmory]

I would try to approach the current owners and deal dirrectly with them .

Unfortunately, no one (not even the county) knows who all the owners are. It's taken years for the county to attempt to track down all heirs and they are not done yet.

 

[EddieWalker]

Update: I have spoken with the attorney employed by the tax assessor-collector, who told me this:
- The full amount of the sale is due that day. In order to bid, I need to have a letter of intent from my bank up to my max bid that says I'm good for the money.
- There is a 6 month right of redemption (this is Texas, btw). The property owner would pay me amount of sale + 15% if they wanted the property back.

I also spoke with a person at a title company, who told me this:
- Tax sales wipe out any existing liens on the property (bankruptcy, child support, etc.), except for federal liens.
- If the there were any federal liens, the feds would probably have taken the property by now.
- I could hire the title company to do a search for me, but it probably won't reveal anything that the county won't find.

Good information. Hope it works out for you!!!!

 

[TheMan419]

Here in Indiana the redemption period is a year and you get back what you paid plus 10%. So the sales are bid way up. If the taxes due are $5K and you buy for $10K you get 10% on the $10K, not just the taxes due. So investors are buying and hope the mortgage company redeems.

If there is no redemption there is a list of notices and court filings you have to accomplish to get a deed. These all have time lines and if you miss a deadline you just get your money back with no interest and the property goes up for sale again the next year.

I would consult a lawyer that is familiar with the process in Texas and make sure you meet all the applicable notice requirements and their deadlines.

 

[TnAndy]

Clear as mud here in Tennessee. They have one year to redeem, interest is 1%/month.....except if they weren't properly notified or several other reasons, then court cases have determined 3 years.

Law states a tax sale gives clear title, but apparently title insurers are reluctant to issue a policy for 10-20 years.

So buying for a flip could be a problem, buying adjoining property to hold a long time, maybe less so.

 

[newbury]

We've a similar situation in Mississippi, when I first got married the wife missed tax payments on several hundred acres she (and her brother and mother) owned and sent me into a panic when she told me someone else had "bought" the taxes. We paid them off the next year with a little interest, no problem.
A few years ago we noticed in the paper that a cousin had missed payment on a 70 acre tract, we promptly went down and paid the taxes, then gave it to him for a birthday present.

Glad taxes are so low.

 

[buickanddeere]

Hire a lawyer to ensure there are no leins, encumbrances , easements etc.
Realestate types are always sniffing around the municipal offices and reading the notices looking for back tax properties.
Co-worker bought a back tax cottage property. A few weeks later a very irate previous family member wanted to know why he was in the old family cottage. The estate had been contested for years and tied up with courts and lawyers before the family member could buy out the rest of the family. Problem was who ever the executor was looking after the estate . They dis not pay the taxes and lost the place before the estate was settled .