Need Help / Advice / Opinion - Tax Sale W / Complications!
I'm looking at a piece of land that is going to be auctioned at a county tax sale, which will result in the issuance of a tax deed.
County Taxes due are $3000
Irrigation District taxes are $2000 (sale is for county taxes - I'm not sure if irr. dist taxes will be erased).
Bank is owed $40000.
Owner filed bankruptcy which was closed July 2003, forfeiting property.
*** Property is red-tagged on title by Health Dept. due to drug manufacturing (owner is in prison). Health Dept. will issue a notice of release if I clean up property at cost of $2000.
I contacted the bank and they are letting the county auction for taxes because they don't want the red-tag problems.
I have two ways to go -
1. Offer bank $$$ to take over their position, pay off taxes and any other liens (estimated total $8 - 10,000), not counting $$$ offered to bank), then file foreclosure. (Still need to clean up red-tag).
2. Try to buy property at county tax sale and risk being outbid or paying high $$$.
Property in cleaned up condition should be worth $40 - $50000.
Anyone have an opinion on which route to take, or other opinions (am I crazy, etc.) or previous experience they could share or any advice, etc.?
Thanks very much in advance!
cfkf
cfkf-----------------
It is good that you have checked out what needs to be done here, especially to get rid of the red tag.
As you don't mention it, I suppose you have the amount of money required to go either way. Buying at tax sales requires all cash at the sale, usually.
If I were in your position I would ask the tax collector/treasurer what sort of announcement they intend to make about the red tag business. If they just say that is has the drug manufacturing red flag and do not mention how easy it will be to remove it, I'd wait to buy at the auction.
There may be other knowledgeable investors there, so you may not get the property. However, this situation is one where you have a good chance of getting the property. Over two-thirds of tax sales attendees are, in my experience, rank beginners. I'd figure that most of the other attendees will not know about the ease of getting past the red tag issue and will not bid. I might even have somebody there to ask a bunch of questions about it in such a way as to show a lot of concern about this issue, hoping this will raise the fear level.
If they intend to not make any announcement, I would have somebody at the door, passing out a flier discussing the existence of the red tag, perhaps with some information from a government publication about what it means, without saying how each it would be to get the red tag removed. And perhaps somebody to stand up and mention it in a somewhat alarmist way.
Be sure and check the situation with the irrigation or water district lien. Probably it will have to be paid in full, probably with interest.
I'd only buy from the bank if I could do so at a very low price and if the people conducting the sale will tell how easy it is to remove the red tag. Or else if I had some information that led me to believe that some very experienced investors would be there. Perhaps from talking to the people at the collection office and asking them about people who have expressed interest in the tax sale. Under this circumstance, I might well buy the bank's loan--if they will sell it--and do a foreclosure.
Good Investing**********Ron Starr*********
I don't know if I misunderstood your post. But if the property is only worth about $40-50,000 and it has a mtge for $40,000, and then there is the del taxes of $3000, plus cost of cleanup of at least $2000, where is there any potential for profit at all? Or am I missing something?
Even if you purchased the property at tax sale, first of all, you still would owe your mortgage of $40,000, from what I understand, regardless of the fact that you lost the property, so you are out money one way or another. If you don't owe the mortgage, then obviously you would rather lose the property via tax sale so that it wipes out your mortgage. However, I believe in most areas, the owner is barred from buying his own property via tax sale, for precisely that reason and others (cleaning up title).
RC
Richen--(NC)-------------------
True, as the owner of the property, he cannot buy at the tax sale and wipe off other liens. At least that is so in CA.
However, The tax sales price starts at $3K. In most states the tax lien is a priority lien and, when foreclosed upon or converted to a tax deed "wipes off" the property most other liens, including the lender's mortgage or deed of trust. This is not true for NM and ME, I believe. I don't know of any other state where is is not true, however.
Good Investing************Ron Starr*************