Author Topic: Stacked Liens  (Read 1672 times)

bmcewan

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Stacked Liens
« on: March 10, 2015, 08:49:23 AM »
Hello Mustachians,

My wife and I are looking at buying a fixer-upper for the rental income. My county has a tax deed sale 4 times a year, selling a quit-claim deed to properties that have fallen three years or more behind on property taxes, in exchange for at least 100% of the taxes owed. Property taxes in NY are the highest in the country, so it's easy for people to get behind. The sales are conducted through a closed-bid system, 10% of the bid amount is submitted with the bid, and all bids are opened and read at the sale. Full fee is due within 30 days at which point you can take possession.

The challenge we are having is that many of these properties have a vast web of liens against them, and I'm having trouble understanding how things could ever be resolved for these properties. Yet I sense there is money to be made here if we can figure it out. We have attended three sales so far, but haven't managed to pull the trigger yet. We reviewed one house recently with the following liens:

$15,000 county taxes
$45,000 federal tax lien
$30,000 state tax lien
$15,000 worker's compensation lien

$105k total

We estimate the house to be worth about $75-90k total, so the liens exceed the property value.

My question is, how would a situation like this ever be untangled? How does a prospective buyer hope to work through multiple layers of liens to get the property unencumbered? Just beginning our journey here, so references to basic books and websites greatly appreciated. There were a lot of people at the auction interested in the property, but everybody ended up passing on it due to the lien situation. Thanks!

ShoulderThingThatGoesUp

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Re: Stacked Liens
« Reply #1 on: March 10, 2015, 11:42:07 AM »
In PA there is a separate sale process where most liens are discharged, but it has to be really delinquent on taxes for that to happen.

babysteps

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Re: Stacked Liens
« Reply #2 on: March 11, 2015, 01:18:44 PM »
I would ask a local lawyer familiar with the process in your county. 

As you have described it, the process isn't too exciting from an investor perspective (closed bids? 100% or more of back taxes? No other liens expunged?)

FYI, federal tax liens usually withstand foreclosure processes.  I would tend to avoid a property with an IRS lien even if the overall auction process were more attractive (open absolute auction, no minimum bid).

You may do better approaching folks who are behind on taxes but not yet foreclosed by the county, or folks who are out-of-are landlords.  Good luck!

babysteps

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Re: Stacked Liens
« Reply #3 on: March 12, 2015, 11:51:27 AM »
You may do better approaching folks who are behind on taxes but not yet foreclosed by the county, or folks who are out-of-are landlords.  Good luck!

That's folks who are
"out-of-area"

not
"out-of-are"  (Sorry, edits timed out)

arebelspy

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Re: Stacked Liens
« Reply #4 on: March 12, 2015, 08:23:44 PM »
A lien with a higher priority can wipe junior liens.  If a particular one doesn't/can't, eventually whenever the higher priority lien does foreclose that can, it'll resolve that problem.
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