Basic Questions - Michigan Tax Liens, Deed, Auctions
OK, I'm new to all of this. Some basic questions. I am interested in buying properties, at a bargain price hopefully, rehabbing them and renting them out. Some basic questions about obtaining properties through tax sales:
1) How does one find out about what properties are available for purchase?
2) How do I get info on where and when auctions take place?
3) I see a lot of discussion here about cleaning up titles for properties obtained through a tax sale. Is this usually a problem? And if so, what typically has to be done to clean up the title?
4) What is the difference between a tax deed and a tax lein? Do both of these correspond to properties that are for sale because of non payment of taxes?
Thanks in advance for any help!
wcarr01--(MI)----------------
You find out what you want to know by going to treasurer or tax collector web sites in your state. You can find about when sales are by calling the counties and asking them. You might try calling the state treasurer's office in Lansing and ask them if they keep any calendar of sales. They used to sell the tax liens which were not sold at the June tax sales in MI. But MI has switched to a tax deed process now.
Study the state statutes related to the collection of delinquent property taxes so you really understand what is going on.
If you are hold for rental, you probably will not need to clean up the title. At least not until you want to do so. If you need to borrow money using a property as colateral, you may have to do a quiet title lawsuit to clean up the title to get a loan.
Good Investing*************Ron Starr************
Let me get to your questions:
1) How does one find out about what properties are available for purchase?
<follow Ron's advice>
2) How do I get info on where and when auctions take place?
< same as above >
3) I see a lot of discussion here about cleaning up titles for properties obtained through a tax sale. Is this usually a problem? And if so, what typically has to be done to clean up the title?
A quiet title lawsuit is performed to clean up title.
I learned from my own investments and real estate law practice that it should be done if your 'buyer' seeks traditional financing. Title insurance is not legally required in order to have a complete real estate transaction, however if your purchaser intends to borrow money from a lending institution (i.e. a bank) it is needed. The Suit to Quiet Title is used to help you or your buyer attain title insurance. Keep in mind that the Suit to Quiet Title and/or title insurance is not absolutely needed if you want to utilize a: 1) lease option, 2) owner carried financing, or 3) landlord-tenant situation.
The Suit to Quiet Title is brought because the title company wants to make sure that any heirs, claimants, or creditors will not make any claims against the property. Their biggest fear is that the sheriff or constable’s office has not properly carried out due process requirements. In such an event someone with an interest in the property might try to come back and say they were not notified, and then the title company would have to pay for the cost to clear up the dispute. The title company believes that if 2 to 3 years pass (after redemption) and no one brings up a claim, then it is likely no one ever will. As a result it is less risky for them to issue an insurance policy on the property. Obtaining title insurance is an area that may result in some difficulty during the first 2 to 3 years of property ownership. The usual challenge will be brought by someone who has lost their interest due to the foreclosure. Let’s think about who stands to lose when the tax defaulted property is foreclosed. The typical parties who will try to raise a challenge are typically:
-the delinquent property owner;
-an heir (someone who may have an inheritance right under a will or state intestacy inheritance scheme);
-someone who holds a court judgment which had attached to the property; and/or;
-a creditor
All of these parties may argue that foreclosure proceeding itself was not legal. The most common area of attack deals with notice. The most common attack on a tax deed typically comes from a creditor or the delinquent property owner who claims they were not properly notified. For example, they may argue that the notice itself was ineffective and never reached them. Another area of attack is the property description. If the description of the property was not exact then it can be argued that they were not really put on notice.
From the outset let me be very clear: The quiet title lawsuit is a formal court proceeding. Before you begin to cringe again about having to hire an attorney once again recall that you are in a very favorable financial position at this point. First, recall that since redemption has not occured then you stand to make a good deal of profit on the deal. Remember if your research has been accurate, the value you receive from the real estate should far exceed any of your costs.
There are some companies who will issue title insurance on tax sale properties without the suit to quiet title. But the general rule that 98% of tax sale investors have to deal with is the title issue. There are also some steps that you can take to make it more likely that you will be able to get title insurance (even without the suit to quiet title) such as obtaining a quit claim deed from the former owner.
Always check around with as many title companies as possible before you decide to perform a suit to quiet title suit. You may just be able to title insurance without one. But its not the rule so be prepared for alot rejection.
4) What is the difference between a tax deed and a tax lein? Do both of these correspond to properties that are for sale because of non payment of taxes?
Yes, both do. However there is a difference in time period that passes before the interest is sold and a difference between what is acutally sold. When you buy a tax deed you have purchased a deed instrument that was held by the county due to non-payment of property taxes. This means that you have an ownership interest in the property as if you purchased it outright.
On the other hand a tax lien is really just a claim or charge on the property. The lien has not been foreclosed and does not pass ownership like the deed will. Rather the lien (or tax lien) will only make you a creditor but not a landowner. Of course there are some variations in all the states and the law does get muddy. Nevertheless, these are the basic differences.
Pretty simple, huh? Keep reading old messages on this board and articles from this site on the subject. It will all make sense!
_________________
Warmest Regards,
Darius M. Barazandeh, Attorney at Law / M.B.A.
NOTE: Any material found on this discussion forum or email with Mr. Barazandeh is for educational purposes only and does not create an attorney client relationship.[ Edited by DariusBarazandeh on Date 04/26/2004 ]
Focusing on the rehab aspects...
If you want to own the property and do rehab projects then tax liens are a slow route. You are buying the county's interest in the back taxes and not the property. Most lines (97%-99.5% are redeemed so you get your investment back with interest). You do not get the property in most cases.
Tax deeds are where you are bidding on the property and you get the property if you win. You need a lot more cash as you will be paying for the property and not just the back taxes. Still a good deal to be had but not 1%-3% of the FMV.
There are other ways to find rehab properties but that is not for this board.
Questions - post here or PM me.
John
[addsig]
Thanks to everyone for the detailed responses!