Author Topic: Tax Lien On Property I Rent?  (Read 1152 times)

coachfrigo

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Tax Lien On Property I Rent?
« on: March 02, 2018, 09:57:39 AM »
I live in Morgantown, WV. There was a tax lien sold on the property at an auction. One of many of his for 2015 taxes. I contacted the guy who bought the lien, and he told me it's often a strategy used in real estate, and is unlikely to not be redeemed.

My question is two-fold. First, what could this strategy be? Secondly, what happens if I redeem the property? Any benefit at all to me?

dandarc

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Re: Tax Lien On Property I Rent?
« Reply #1 on: March 02, 2018, 10:35:16 AM »
Here's how it works here (Leon County, FL).

Owner fails to pay property taxes on time
A tax certificate is sold via auction.  The auction is actually bidding down the interest rate on the certificate - whoever is willing to accept the lowest return wins.
Whoever wins the auction pays the amount of the back taxes and now owns the tax certificate.  I'm not sure if the certificates can be transferred.
The owner may redeem the certificate, paying the face value + interest + fees.  The certificate holder thus gets a return in the amount of the interest.

If the owner does not redeem the certificate, the certificate holder can force the sale of the property.  The certificate will be resolved if / when the property is sold.  The certificate holder can buy the property at the auction, but so can anyone else.

Now, most properties are worth far more than any back taxes on them, so the owner will typically redeem the certificate in relatively short order.  So a lot of the investors in the certificate look at these things as more or less guaranteed returns.

Cursory reading of the sheriff's office in Morgantown's website indicates it may be a similar process there, but you should do a lot of research if you want to get into this type of investing.

coachfrigo

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Re: Tax Lien On Property I Rent?
« Reply #2 on: March 02, 2018, 10:36:58 AM »
Here's how it works here (Leon County, FL).

Owner fails to pay property taxes on time
A tax certificate is sold via auction.  The auction is actually bidding down the interest rate on the certificate - whoever is willing to accept the lowest return wins.
Whoever wins the auction pays the amount of the back taxes and now owns the tax certificate.  I'm not sure if the certificates can be transferred.
The owner may redeem the certificate, paying the face value + interest + fees.  The certificate holder thus gets a return in the amount of the interest.

If the owner does not redeem the certificate, the certificate holder can force the sale of the property.  The certificate will be resolved if / when the property is sold.  The certificate holder can buy the property at the auction, but so can anyone else.

Now, most properties are worth far more than any back taxes on them, so the owner will typically redeem the certificate in relatively short order.  So a lot of the investors in the certificate look at these things as more or less guaranteed returns.

Cursory reading of the sheriff's office in Morgantown's website indicates it may be a similar process there, but you should do a lot of research if you want to get into this type of investing.

Any idea about what might happen if I redeem the property?

dandarc

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Re: Tax Lien On Property I Rent?
« Reply #3 on: March 02, 2018, 10:41:29 AM »
If you "redeem" the lien, that means you're paying off the back taxes.  Not sure why you would do that on a property you don't own - if you hold the lien, you'd be essentially paying yourself.

Suppose the benefit would be a lower chance of the property being sold and you having to move, but otherwise you're just paying the taxes that your landlord owes.

coachfrigo

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Re: Tax Lien On Property I Rent?
« Reply #4 on: March 02, 2018, 10:44:39 AM »
If you "redeem" the lien, that means you're paying off the back taxes.  Not sure why you would do that on a property you don't own - if you hold the lien, you'd be essentially paying yourself.

Suppose the benefit would be a lower chance of the property being sold and you having to move, but otherwise you're just paying the taxes that your landlord owes.
Gotcha. I wonder why that's even an option. I thought maybe if I redeemed, I might get an interest on the property.

dandarc

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Re: Tax Lien On Property I Rent?
« Reply #5 on: March 02, 2018, 10:47:06 AM »
You generally have to wait until a tax deed is issued and sold by the city/county, and depending on how your area works, you may or may not have any advantage in buying the property this way.

Basically, if you're looking to invest in tax-delinquent properties, there probably isn't a hugely compelling reason to be more interested in the house you're renting vs any other property.

coachfrigo

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Re: Tax Lien On Property I Rent?
« Reply #6 on: March 02, 2018, 10:50:57 AM »
You generally have to wait until a tax deed is issued and sold by the city/county, and depending on how your area works, you may or may not have any advantage in buying the property this way.

Basically, if you're looking to invest in tax-delinquent properties, there probably isn't a hugely compelling reason to be more interested in the house you're renting vs any other property.
Not sure if it has been issued. But my landlord had until April 1 to pay the delinquent 2015 taxes. Landlord has quite a few unpaid. Not sure if it's strategic or if he's broke.

Sibley

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Re: Tax Lien On Property I Rent?
« Reply #7 on: March 02, 2018, 11:11:38 AM »
I'm confused. Selling a tax lien? you sure it wasn't the property itself?

I'm more familiar with the property itself being auctioned off to satisfy back taxes. IE, you don't pay your taxes for x number of years, the county confiscates the property and auctions it in a tax sale. Taxes are paid from the sale, and new owners are responsible going forward.

phred

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Re: Tax Lien On Property I Rent?
« Reply #8 on: March 02, 2018, 12:55:18 PM »
Sibley:

There are two systems.  Some states are categorized as tax lien states, and some are known as tax deed states.  The auction on the courthouse steps by the sheriff gets you the deed to the property -- this is the tax deed system.

Atax lien is sort of like a certificate of deposit.  You front the county the property tax and get an interest bearing (or fee bearing) certificate in return.  When the property owner finally pays his back prop. tax plus the interest penalty the lien holder get reimbursed the money he fronted plus the interest.  Sometimes properties aren't redeemed because they have become worthless.  Lien holders can force unredeemed properties to auction, or gain title -- it depends on the state

A very few states or counties can be both tax deed and tax lien at their option

phred

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Re: Tax Lien On Property I Rent?
« Reply #9 on: March 02, 2018, 12:58:19 PM »
Coach:

   Has the property owner also not paid his 2016 and 2017 taxes? Maybe you could work out a deal where you pay all the back taxes in lieu of rent?

   I'm not sure if a lease would hold if a new owner gains the property