Who Gets The Excess Proceeds
Hi All,
About 3 weeks ago, I attended a tax sale here in Maryland (tax lien state). A house assessed at $80,000 "sold" for $70,000. The highest bidder can start foreclosing in 6 months.
Assume I manage to buy from the current owner the house for $60,000, paying off all liens except the tax lien, then let highest bidder at the auction foreclose on me. Will I be able to claim the $70,000 excess proceeds after foreclosure and therefore make $10,000 profit ?
[addsig]
chances are if the person who bought the lien bought it for the interest rate and not the property if they bid it up that much, so they will probably never foreclose it and try to scare the person into paying the lien off so they can get their money back plus interest, if you were to buy the property from the owner the tax lien would show up on the title report and would have to be cleared up before a clear title could be issued.
Quote:
On 2004-06-19 07:39, keoki wrote:
chances are if the person who bought the lien bought it for the interest rate and not the property if they bid it up that much, so they will probably never foreclose it and try to scare the person into paying the lien off so they can get their money back plus interest, if you were to buy the property from the owner the tax lien would show up on the title report and would have to be cleared up before a clear title could be issued.
Hi Keoki,
Thanks for your reply, but that doesn't answer my question. I am asking a hypothetical. Assuming a certain number of things happen, will I get the excess proceeds. I am not asking how likely those things will happen.
[addsig]
I think the question is badly formed.
Are we talking a tax lien (TLC) or a tax deed? If a TLC then how does a Maryland TLC work? Is the sale one where the interest rate is bid down, where you bid for a percentage of the underlying security or where you are bidding up the value of the TLC (early pay off means you lose the premium paid in this case)? There is a fourth option but I forget that model.
A TLC sale means you are bidding on the actual lien. A tax deed sale means you are bidding on the asset securing the TLC and the proceeds of the sale will go to satisfy the TLC. Any extra proceeds after the deed sale can be paid to the owner if that is how the specific state works such a sale.
John
[addsig]
Quote:
On 2004-06-19 14:16, active_re_investor wrote:
I think the question is badly formed.
Are we talking a tax lien (TLC) or a tax deed? If a TLC then how does a Maryland TLC work? Is the sale one where the interest rate is bid down, where you bid for a percentage of the underlying security or where you are bidding up the value of the TLC (early pay off means you lose the premium paid in this case)? There is a fourth option but I forget that model.
John
Hi John,
Maryland is a tax lien state. The bidding system is to bid up the sale price. For example, when the highest bidder bid $70,000, that means that she paid immediately the back taxes (a thousand dollars or so) and a high bid premium. If the lien is not paid in the next 6 months, she can start foreclosure. If the judge forecloses the rights of redemption, then (and only then) will the highest bidder have to come up with $70,000 to get a deed to the house.
My questions is this: assuming I buy the house from the current owner for $60,000 and subject to the tax lien (but subject to no other lien), and assuming the rights of redemption are foreclosed next year and the highest bidder actually pays $70,000 to get the deed, will I, as the owner at that time, get the $70,000 or so ?
[addsig]
Abdenour --(MD)-------------------
This is likely a state-specific answer.
You probably better study the law books for the answer.
Here in CA, the property owner is entitled to excess proceeds after a tax auction. However, other lienholders have priority over the owner.
Also, here in CA, when you buy the right of excess proceeds after the tax sales, you have to follow a statute intended to protect owners. You must notify the owner of the value of what you are buying. If you act for the owner to claim the excess proceeds, you can only get a 10% fee of the amount recovered.
It might be that courts have faced lawsuits on these circumstances in MD and have come up with decisions related to them.
Good Investing***********Ron Starr*********