Not Sure If This Is A Good Deal Or Not...
A gentleman here in Austin has contacted me in regards to buying his house. Problem is, I don't know enough about the tax arena to know what to do with this, if anything at all. Seems like I should do something with it, but not sure what... Here it is:
He owes $75k, including the $10k in back taxes he owes and it's to be auctioned on June 1. The FMV is $93k. I guess the appropriate questions are, number 1, is it possible for me to purchase the tax certificate prior to the auction? And number 2, are there any investors out there who would like to partner in this deal with me?[ Edited by crazyfnmama on Date 05/17/2004 ]
crazyfnmama --(TX)-------------------
First, when you say "The FMV is $93k." what do you mean. Is that a figure you saw in the appraisement district records or do you really know the market values in your area so you know for sure what the house would resell for were it put up for sale?
Then, who does he owe the $75K to? If there is an institutional lender involved, they are very likely to pay the delinquent property taxes and then demand repayment from the owner. Then, if they do not get the repayment, they will start foreclosure on their loan for breaking the provisions about keeping senior obligations paid up.
So, if the lender knows of the auction, they probably will pay the delinquent property taxes. Have you studied the TX law on the collection of delinquent property taxes? I did, but it was several years ago, so I forget the answer to the next question. Can the lender redeem the property, as well as the [former , defaulted] property owner, during the redemption period? If so, they might do nothing until later.
Is this a homesteaded house? If so, the redemption period is two years rather than the usual six months. So there is no panic necessary, no quick action needed.
Have you verified what the owner owes by doing your own careful title search? If not, how you know what he owes isn't more than the value of the property?
No answers, just questions. But answers created in the dark if lack of knowledge would be like paintings brushed in the dark room.
Good Invest ing***********Ron Starr********
Thank you, Ron. First, I determined the FMV by reviewing comps in the neighborhood. It's more than the CAD assessment. As for the money he owes, he has $65k remaining on his mortgage and the other $10k is what he owes in back taxes. I can't say I've *studied* the laws, but I've reviewed them since the owner of this home came knocking. What I do know is that all (with a couple of exceptions) homes in TX are homesteaded. So, yes, the owner has 24 months to pay up (with 25% the first year and 50% the next... or the other way around). You mention doing a title search. Do you mean just call the title company and ask them to open title? Or are you suggesting something different? But, to answer your question, I haven't done this yet as I didn't see a point if it didn't look like a deal with which I wanted to mess. As always, I'm honored to receive your assistance.
crazyfnmama--(TX)----------------
Ok. The property sounds like a pretty good deal. You still need to know what is owed on the mortgage. Is it current? If not, what is owed to bring it current?
When I talk about a title search I mean that you go down to the county clerk's office where the land records are and you look up the person's name in the grantor/grantee index. Or perhaps you look up the legal description in the index of properties book. From this you see that the person actually has deeded ownership and nobody else is on title. And you see what obligations would be against the proper ty, such as judgments, loans, liens, etc. Also easements and pending lawsuits that might effect the ownership or obligations against the property after a judgment is rendered.
Many property owners who are this behind in taxes also have other obligations against themselves and the property. They know and don't tell you or the don't understand that these are against the property.
If the deal still sounds ok after your research, the question then is what resources you have available to make something happen that is good for you.
Do you have the money to pay off that tax delinquency, were you to buy the property from the owner for a kilobuck or two? If not, do you have a money person that could throw in with you to make the deal happen?
Then you have to worry about things like getting the owner out of the property before you pay the taxes. You help the owner into a rental situation, with the money that you pay them, including maybe paying for a rental truck to do the moving.
Also, when you talk about the FMV, are you taking into account the cost of getting the property in good condition for either renting or selling? And what is you plan here? Buy for quick resell?
You might, if you don't have much money, try to tie up the property for a sale price a kilobuck or two over the obligations and then sell through an assignment that agreement to some investor who has the money to buy the property and deal with it.
Good Investing**************Ron Starr**************
Ron, Thank you again! You are so thorough and so should I be. I have lots of homework to do.
thank you!