[jamaicabound]

I remember years back in Real Estate classes hearing about these and thinking they were interesting but never looked into them. They may vary how they work by state I'm not sure but in my state at least it works like this.

People behind in real estate taxes whether homeowners or developers or whoever their properties are auctioned. The buyers do not bid a price but bid an interest rate between 1% and 18%. If nobody bids the government takes over the property at 18%. If I bid 12% and other bid say 15% I win.

The buyer then has the next I believe 2 years to pay me back the back taxes plus interst. If they pay me back I get my money back plus interst. If they don't pay me back I have a lien and then take the property.

Anyone have any experience with this? What I'm most curious about is does the owner of the property pay the county who in turn pays me or am I responsible for trying to collect? Also at the end of the process how complicated and costly is it for me to turn my lien into me owning the property? ANything else of interest from anyone with experience with these I'd love to know.

[fortysix]

Interested in this as well.

I may be missing something but if a tax payer's property is being auctioned for failure to pay property tax, and you win the bid and get the lien on the property, what impetus does the taxpayer have to pay you, if he already failed to pay the government? Is it the reduced tax rate that incentivizes him? Do you negotiate a lower payment somehow? Also, do you need a brokers license to do any of this?

[jamaicabound]

(10-14-2015 12:45 PM)se7en Wrote:  

Interested in this as well.

I may be missing something but if a tax payer's property is being auctioned for failure to pay property tax, and you win the bid and get the lien on the property, what impetus does the taxpayer have to pay you, if he already failed to pay the government? Is it the reduced tax rate that incentivizes him? Do you negotiate a lower payment somehow? Also, do you need a brokers license to do any of this?

First off I believe this is only possible on properties owned outright as a bank would never lose a property over a few hundred bucks, they would pay the property taxes out of their own pocket before it ever got to this.

I am somewhat confused as to why a buyer would lose a house, even a cheap house worth 40K, over a $500 tax bill but who knows people find themselves in bad situations or maybe someone dies and doesn't have family, I don't know.

As far as why would the taxpayer pay me, because if they don't they'll lose the place. As a buyer I would think you'd want to not get paid. Don't get me wrong 18% is great interest but you have to be competitive with other buyers so if its a sought after property I'd imagine people are going 10% or less. Personally speaking I would much rather take over a property for a small tax bill than just make say 8% interest.

Why would someone pay me if they failed to pay the government? Could be they were out of work and wound up getting a job. At the end of the day though as a buyer you are either taking over a property or getting paid nice interest so it seems like a win/win situation.

No you don't need a brokers license, some counties have a better website setup than others, some have a packet for new tax lien buyers which kind of outlines the process but I still had a couple questions not mentioned there.

If your interested google search your county and tax lien sales auction so for example "cook county tax lien sales auction" and you should popup the first couple results either upcomming auctions or results of recent auctions which should lead you to the counties website for this stuff and more info.

[Bacchus]

Bump.

Anyone ever do this? I'm especially interested in flyover states.

[Off The Reservation]

^ why are you interested in flyover states, which ones?

[BostonBMW]

I have dabbled in a few tax lien sales here in New England. It's basically playing the lottery, if you are expecting to get the title to the house because in most cases, the homeowners (or next of kin) have come up with the cash owed. Perhaps it might be a better in the Midwest/flyover country, however with the houses cheaper there, I am not sure if it makes sense to tie up the capital. In my region, housing values tend to be higher, which brings in more interested parties (competition) and the returns are lower (4-5%).

I'm sure there are lien investors, who deploy their capital to buy up tax liens and then act as debt collectors, however that's not my favored strategy.

[BBinger]

Back in Illinois I had an acquaintance who was involved with this. The format of the auctions varied from county to county. In one the auctions were so blantantly rigged the county got sued and had to change their format to an actual auction instead of a background pow wow followed by a token auction like ceremony.

(10-14-2015 12:45 PM)fortysix Wrote:  

Interested in this as well.

I may be missing something but if a tax payer's property is being auctioned for failure to pay property tax, and you win the bid and get the lien on the property, what impetus does the taxpayer have to pay you, if he already failed to pay the government? Is it the reduced tax rate that incentivizes him? Do you negotiate a lower payment somehow? Also, do you need a brokers license to do any of this?

Most people whose tax debts end up at auction missed a payment (in one county, in another they could be further behind). The lucrative niche my acquaintance's firm pursued was bidding on debts small enough to take to small claims court for enhanced damages and putting that on the lein. Everyone's bidding on the lowest interest rate, but they make their money on the enhanced damages in small claims court. This typically doubles or triples the amount owned. Taking shit all the way to foreclosure was generally the most undersirable outcome, because that shit complicates taxes and there's usually other leinholders.

What tends to keep counties from pursuing collection on their own is the people bidding tend to be friendly to their campaign funds, and it adds a layer of obfuscation between the politicians and this grave infliction of misery.

It's a racket in human misery, but it can be a comfortable if not incredibly lucrative one. Everything however is very local. You have to make low character friends in higher enough places to be long term competitive in your chosen territory. You will likely make enemies in surprisingly high places as well considering the low bar for mistakes that can trigger ending up on the auction block. This is the sort of business where you might want to live a couple counties over, keep big loyal dogs, and hang a shotgun over the bed.

Before committing to this you will want to do some soul searching. It is consistent income for consistent footwork if you get in, but you want to be sure you are enough of an asshole to pull it off. For every fellow asshole whose sloppy record keeping lead them to them miss a payment, there is going to be a sob case which might pull at the heartstings, and there is going to be two crazy methed out motherfuckers. To make a profit, even with triple damages in small claims court you have to collect at least 2 of 3 and one meth guy is probably going to prison before you can collect. The otherwise put together fellow is paying you, you have to squeeze the sob stories and meth cases.

Lifestyle compromises are involved, you won't be able to safely go to a bar in the counties you do business. The small claims court dates are going to be during weekday business hours which makes having another line of work a challenge. Thankfully court dates and auctions are likely to be infrequent enough a 100 mile commute might not be intolerable.

Just about every detail other than the hazards and lifestyle changes necessary on your part are going to vary from region to region. My acquaintance ended up moving to the hellhole that is Chicago for two years to get some distance and reinventing himself as a sports journalist in that far less lucrative line of work. If you are comfortable enough being an asshole and you have the social skills to network with the right people, its a living, but it demands the kind of rare person. There are reasons people don't pursue this otherwise seemingly easy money.

[Bacchus]

(11-05-2018 03:03 PM)Off The Reservation Wrote:  

^ why are you interested in flyover states, which ones?

Nebraska, Wyoming, Idaho. These are the cheap areas of the country, but won't be as more people leave California.

Basically, I'd like a way to cheaply acquire real estate in these areas.

Based on the replies, it's not something you can dabble in though.

[BBinger]

(11-08-2018 07:46 PM)Bacchus Wrote:  

(11-05-2018 03:03 PM)Off The Reservation Wrote:  

^ why are you interested in flyover states, which ones?

Nebraska, Wyoming, Idaho. These are the cheap areas of the country, but won't be as more people leave California.

Basically, I'd like a way to cheaply acquire real estate in these areas.

Based on the replies, it's not something you can dabble in though.

Well, if you want to own the land the safer bets are foreclosure, estate, and bankruptcy auctions. If I recall correctly Wyoming doesn't have property taxes. It wouldn't hurt to take a quick glance at the rules in areas that interest you, but keep in mind that tax auctions would put you in the debt collection business instead of the property business.

[Shimmy]

I have experiences with this, they can go both ways. If the market is really good people sometimes overbid because they always assume its a good deal since its an auction and also get wrapped up in "oh only $500 more" and end up emotionally overbidding.

In a flooded market you can get some great deals, only so many people have cash for this and the ones who have tons of cash are buying at a huge discount and not paying anywhere near market value so the prices don't go too high.

This depends on the market (in my area each county had their auction once a year). Sometimes you are stuck evicting the person, sometimes the house is abandoned. I had a friend who had to evict the squatter who moved in when it was vacant and the guy actually showed up to court and was dumb enough to argue that he did some electrical and drywall work there so he should be allowed to stay for free.