Redemption Period Ending Question
I have a pretty basic question, my LO wanted to know as well. We are new to REI and trying to learn as much as possible. Thanks in advance.
Lets say you purchase a tax lien for 6K. The house is worth 150K. The redemption period for GA is 1 year and a day. The period expires without the redemption happening. We go through the foreclosure process in order to take possession of the property. Assuming we have done everything correctly, what happens if there is is still amount owed on the house? Say they still owe 125K..do we then take over and absorb the loan amount? If not, what happens to that money that is owed the lender?
Thanks again!
Brian
During the foreclosure process the lender is given the opportunity to pay off the tax lien. If they do not it is their loss, and you will get a tax deed free and clear of any mortgages, but you might still have other county liens such as water & sewer that must be paid, but any other liens or trusts would be wiped out, except federal liens if any.
Keoki..thanks for the response. So basically, the lender is out of luck. That amount that the homeowner owed on the loan is now dissolved? Thanks again.
But wait a second, if the lender has the opportunity to foreclose on the property, and they choose not to do so, is that not a red flag for that property? In other words, why would a lender choose not to foreclose on the property and lose the mortgage/capital they are entitled to? Am I missing something here?
Michael
MichaelMedwed-------------
Please do not assume that everybody that works for every company is competent and does a good job. Sometimes people screw up.
I have bought three houses on the tax resales in OK over the past 5 selling dates where I was told afterward that there was some loan secured on the properties. Those lenders had only to pay the delinquent property taxes, demand repayment of their advance for the payment of the taxes, and, if not reinbursed, foreclose on their loans.
This is three out of 11 properties upon which I received deeds. Now, I don't know that this is an accurate indicator of the number of sloppy companies out there, but it sure makes me think a bit. How about you?
Good Investing********Ron Starr***********
Thank you for the reply. It does make me think. Although, lets assume that most lenders dont make silly mistakes. If the lender specifically chooses not to foreclose on the property when they had the chance to, would this indicate a red flag on the property? In that case, on most tax sale properties? If the bank doesnt want the properties, why would I?
I have appreciated your insight.
Michael
MichaelMedwed-----------------
I worry that you are letting some some bureaucrat's decisions influence your decision making.
I don't even check to see if there are loans against the properties I buy at tax resales in OK or at tax sales in CA, as they are wiped off the properties by the tax auction. If you can do the same where you plan to invest, you'd never even know what some lender's folks did.
Good Investing**********Ron Starr************
What's it worth to you, time wise, to find out? That's gotta be your first decision. Based on RonaldStarr's experience, non-redemption by lender is not necessarily a red flag. As the redemption period approaches (but before you spend $ on atty) might want to do a thorough search of property; Google the address/owner/neighborhood for possible issues, ask the city/county, state/EPA (and search their websites), investigate the property as best you can; if it's still occupied, you could go door to door (talking to neighbors could really uncover the dirt!), taking an "environmental survey," maybe slip in other questions as chit chat, harmless enough. Once you're comfortable, probably should foreclose fast lest the bank reads its stack of mail and discovers its mistake.
I guess this is as good a place as any to ask this question. If you purchase a tax lein then you have simply invested your money for the duration of the redemption period, unless the property is redeemed, Correct? If the property goes unredeemed then you have to foreclose on the property to actually get possession of the property? Am I missing a step or is that a basic understanding of the life cycle?
armbruster512-----------------
Every state has different laws. In some states you have to foreclose the right of redemption of the tax lien. In other states you do not.
For instance, in AZ, there are two ways to get a tax deed, one through the courts, the other, after a longer wait, through a deed issued by the treasurer's office, which is an administrative action. In OK, you have to send notices to all of the parties of interest telling them of your intent to get a deed from the treasurer's office. If they don't redeem within 60 days, you can get your tax deed. No foreclosure in OK, just an administrative procedure.
Every state is different.
Good Investing************Ron Starr***********
What do you know about Texas laws.
Armbruster---------------
Are you asking how the tax sale foreclosure works in TX? There are a lot of posts here about it.
You get a deed to the property. IF the property is not redeemed within 6 months for most, 24 months for homesteaded and agricultural lands, you have your deed. There is nothing more to do. The right of redemtion lapses and your deed automatically ripens into full ownership interest.
Good Investing*********Ron Starr************
You state that you then can get the tax deed BUT that does not mean clear title correct? It is still a tax deed meaning you may not be able to get the required insurnace etc? Or am I way off base and the foreclosure takes care of those issues? (newbie and trying to figure it all out before my redemption is up or before i go purchase more properties in al)
Not sure about other states, but I read that in GA, almost 95-97% of the tax lien certificates get redeemed during the alloted time frame (in GA, it's 1 year, 45 days). Sounds pretty much like a good vehicle for investment, as the return is 20% in GA. That being said it probably is wise to know exactly what happens once the redemption period ends....this site has some great info available!
Brian,
Have you invested in any tax deeds in GA yet?
Also, in your last post you used the term tax lien certificate. It was my understanding that GA is strictly a tax deed state, with right of redemption. Am I correct on this?
I would be interested in swapping information on Tax Sales in GA if you are interested.
Thanks.