Posted by Alexander (Fl) on January 15, 2002 at 14:19:36:
Ben,
I am very clear now to the fact that one must have a legal interest in the property to redeem the tax lien.
I used to be involved in “HER-hunting” but my wife said I had to stop that. Must be the italian blood in me.
Never been interested in “heir-hunting”
Good heads-up anyway.
Hostile Takeover of Tax Lien Certificates? - Posted by Alexander (Fl)
Posted by Alexander (Fl) on January 15, 2002 at 08:37:08:
Once a tax lien certificate is purchased by a financial institution at a tax auction, can the lien be paid off and assumed by another party?
In other words, can an individual approach a bank and say that he wants to pay off a certain tax lien even if the tax lien is not on his property?
Now, if this is transaction is allowed, does the new purchaser assume all the original terms of the certificate such as interest and right to foreclose?
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Ron
Posted by Ron on January 15, 2003 at 13:52:56:
Has anybody actually taken possession of property after purchasing a tax lien certificate? From what I’ve heard, usually the mortgage holders step in and pay off back taxes, interest, etc. if the homeowners don’t.
I think you’re a little confused… - Posted by Marcos
Posted by Marcos on January 15, 2002 at 13:14:48:
In Florida the homeowner has 24 months to redeem the tax lien. If they redeem, all that means is that they have paid their taxes. PERIOD. All other liens stay in place. If they pass their 24 month period, then yes you can get the property using the tax lien. But only then. In Georgia, it’s 4 years I think.
You don’t buy Tax Liens in Florida to get the property. A state like Ohio is much better for that, where they actually sell Tax Deeds. I have talked to Florida investors who have bought hundreds of tax liens and have never yet gotten a property. And the ones that did get them, they were usually junk properties anyway.
There would be no reason I could see to go to a bank. I don’t see their motivation to sell them to you. And what would be the point, if 99% of them redeem anyway, what will you have gained by paying a premium for them?
Will a homeowner deed you a house because they owe a few thousand on backtaxes for a small sum? What do you think? These are the same people that would deed you the houses anyway, it has nothing to do with the backtaxes. So, the tax lien isn’t going to lead you to these people as 99% of people with tax liens will redeem anyway. Find a way to talk to all motivated sellers not just ones that owe taxes.
Just my thoughts,
Marcos
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on January 15, 2002 at 10:04:38:
You could approach the bank to buy the tax liens, but why would the bank want to sell? I assume that they know what they are doing. Why would they sell the liens at a suitable price to you instead of waiting to collect the interest? Statistics say that a vast majority of tax liens (I heard it was 85-90%) are redeemed before the tax lien holder forecloses on the right to redeem and gets a tax deed to the property. So the bank is looking for the interest. They will take the property if need be, but they are primarily looking for the interest. In our state, that rate is 20%. Now if you were to offer them the same 20%, I would think they would take it. But why would you offer them the 20% interest? If the owner of the property redeems the certificate and pays the balance plus interest, you just got your money back and no more. That doesn’t sound like a good investment to me. Remember, a vast majority of tax liens are redeemed before they are foreclosed, so using tax liens to buy property is not a very workable consistent plan to acquire real estate.
Why not just go to the tax lien auctions and buy the tax liens yourself?
Re: Hostile Takeover of Tax Lien Certificates? - Posted by JD
Posted by JD on January 15, 2002 at 09:44:49:
You can’t make the Bank sell you the certificates. They could of course voluntarily assign them to you, presumably at a premium. I have on a few occasions purchased judgment liens on properties, then called the tax lien certificate holder and offered to purchase the individual certificate on the property the judgment was on at a premium. The only two times I was successful (I paid a large premium) were with private individuals. The two times I tried to buy them from the large corporate investor, they (irrationally) wanted too big of a premium.
Re: Hostile Takeover of Tax Lien Certificates? - Posted by SuperCat (IL, KY)
Posted by SuperCat (IL, KY) on January 15, 2002 at 08:56:21:
I am not sure what you are asking, but I can see two possible scenarios here.
Contact the person who hasn’t paid their taxes, and find out if they intend to pay them. If not then pay them a token sum of $25 to $500 (depending on the property to QCD the property to you. You then go pay the county tax collector the back taxes and now you own the property and the tax lien cert holder who was hoping to take the property has to settle for only the interest.
Offer the tax lien cert holder a premium to buy their certificate and then if owner doesn’t pay you get the property. if they do pay then you lose your premium.
The above scenarios are standard generalizations and do not work ine every state like Florida as theri laws are different.
Re: I think you’re a little confused… - Posted by Alexander (Fl)
Posted by Alexander (Fl) on January 15, 2002 at 13:44:26:
Marcos,
we’re not talking about any other liens…just tax liens.
If you read the thread from the beginning you’ll understand where I’m coming from regarding investing some capital.
I appreciate you reiterating the same thing that was said previously regarding “the bank’s motivation to sell”.
The question had nothing to do with the bank’s motivation to sell or not to sell, but whether the bank had to sell, or assign the tax certificate, if a third party fulfilled the homeowner’s responsibility for the tax lien.
Ben answered this issue by mentioning that a legal interest in the property is required.
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Alexander (Fl)
Posted by Alexander (Fl) on January 15, 2002 at 10:23:25:
Tim,
you make a very good point.
We don’t go to tax auctions for the exact reason you mention. Not enough return on your money…until now.
Deals that meet our standards of “deals” are far and few between in our area right now.
We are working on two large projects that should take the better part of this coming year and we were looking for a passive investment to park some capital for at least twelve months.
We know that the this bank holds certificates on some interesting property around here.
Why would the bank sell.
That was my question. Our reasoning was that if a homeowner can redeem a tax lien at any time and pay it off, why couldn’t someone else in their place.
We could then make a safe, dependable return if the certificates got paid off. Fine.
If they didn’t get paid off, then we would enforce the right to foreclose. Fine too.
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Alexander (Fl)
Posted by Alexander (Fl) on January 15, 2002 at 09:24:37:
I want to clarify my question a little more.
We have a fair amount of cash we want to invest in passive investments.
We want to approach a bank that holds a portfolio of tax lien certificates and offer to purchase them (pay them off)
I believe a homeowner has the right to pay off a tax lien at any time (within 24 months in Florida) and bring his tax bill current.
My question is whether the bank is obligated to sell (assign) the tax liens if they are paid off by a third party (us).
Would we then step into the shoes of the original tax lienholder and have the same rights to enforce the lien as the bank did.
Your idea of negotiating with the delinquent homeowner is a good one. Do many people actually sign a Quit-Claim deed for that small token amount?
Alexander
Re: I think you’re a little confused… - Posted by Marcos
Posted by Marcos on January 15, 2002 at 21:38:18:
I apologize. But, I’m from Florida and have been to a few tax sales, and don’t quite understand how you’re going to make money.
Yes, I read the posts from beginning to end. And I still see no avenue you’re speaking of where you’re going to make money. I personally think you’re trying to create something where there is nothing.
Perhaps you’d be willing to explain where I got it wrong. I might have missed something here. I guess my point is, how can you profit from buying a tax lien outside of the tax sale? I just don’t see it. The reason why I thought you were confused is that I’m not sure you exactly know what a tax lien is and how it affects the ownership of property and all other liens on the property. If you’re not going to gain control of the lien(purchase it from the bank), and you’re going to approach the homeowner. Then you’re not talking about Tax Liens. The Tax Lien is a secondary issue, you have to find someone to just give you the house. Once you have control of the house, then you worry about the back taxes. Which of course means you have to pay the lien holder off. Which then leaves all other liens on the property. Otherwise, the tax lien holder gets your property after the redemption period. But, as I’ve said the tax lien becomes secondary when you’re talking about tracking down the owner. Although I suppose you would have a better closing ratio of people giving you their houses who don’t pay their taxes, than most other people you’d find on the street.
The point is Alexander, it’s not hard to get the 18% returns here in Florida the normal way using Tax Liens. But, if you’re trying to acquire properties there are much easier ways to go about it.
HTH,
Marcos
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on January 15, 2002 at 11:44:55:
I still don’t get why you would want to do this. Maybe my point would be clearer with an example. We will assume that the interest rate on the tax lien is 20% per year. Let’s say that the bank bought a tax lien for $10,000. So in one year they would expect to get their principle back ($10k) plus 20% interest ($2k) for a total of $12,000. So they are looking to get that full $12,000. They have no motivation to accept anything less. So say you come along and offer to buy the lien. The bank would probably accept $12,000. Probably not much less. If you buy at $12,000, and then the owner redeems the lien at the end of the year for $12,000, what is your profit? Remember the owner is on the hook for the original lien amount ($10k) plus interest ($2k). So you make no profit here.
If you wanted to redeem the tax lien, similar to what the owner would do, you would also have to pay the principle plus the interest, or $12,000. Plus in this case, you have NO security. The bank didn’t sell you their tax lien, you just came along and redeemed the tax lien out of the goodness of your heart. Now the owner of the property is off the hook and you just gave $12,000 away.
So tell me, where is the safe, dependable return here? I can’t see where you would make any money at all.
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Ben (NJ)
Posted by Ben (NJ) on January 15, 2002 at 12:10:10:
The tax lien holder is not “obligated” to do anything.
He may be interested in assigning you the lien but would almost certainly want a premium. Think about it, if there is a chance of his getting a property for ten cents on the dollar why would he assign the lien to you at face value and walk away from the big money? Furthermore, you can pay the delinquent taxes of anyone you want but it will be considered a gift on your part since you have no legal interest in the property. It won’t be considered a '“redemption” of the lien. Roy at taxsales.com has some interesting angles as to acquiring tax forfeited lands for token amounts.
Re: Hostile Takeover of Tax Lien Certificates? - Posted by SuperCat (IL, KY)
Posted by SuperCat (IL, KY) on January 15, 2002 at 10:31:58:
The bank is not obligated to sell to you and if you pay of the tax lein then you are only doing the homeowner a favor. A bank owning the certificates is no different than Holding the tax lien certificate in Florida is not a great investment opportunity.
I would never advise anyone to buy tax lien certificates in Florida from the county or from another investor as they are very high risk and a pain. The reason as you have to force the sale and the county is not much of a help. Once you force the sale anyone can buy the property at the auction and I believe all you get is the original interest.
Florida is great to track down owners and pay them a small fee to sell the property as if they are going to lose the property anyway at least they get some money. There are other states that are more appropriate for tax lien investing than Florida, and pay a higher return. Now buying the tax deeds at the sale the poor tax certificate investor had to force is another story. 
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Alexander (Fl)
Posted by Alexander (Fl) on January 15, 2002 at 12:06:45:
Tim,
Not looking to buy the tax lien at a discount.
The question was about this scenario:
Bank owns tax lien in the amount of $10,000.
We redeem the tax lien at $10,000 plus interest and penalties like the homeowner would have to do to bring the tax bill current.
We now own this tax certificate which would either pay us interest until it is redeemed by the homeowner, or, we wait to exercise our right to foreclose on the property.
I believe we got satisfactory answers to the initial post and the best course of action is to approach the homeowner directly.
By-the-way, I still can’t see where a homeowner would deed his house away for a few hundred bucks instead of selling it…at least in our market (Miami).
Thanks for your ideas.
Alexander
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Alexander (Fl)
Posted by Alexander (Fl) on January 15, 2002 at 12:20:49:
Ben,
What I am trying to understand is this:
If the homeowner has a statutory 24-month right to redeem the tax certificate (ie the bank must accept the payment) why wouldn’t a third party have that right to redeem that same tax certificate?
In your post you mention “legal interest in the property”.
that is the part of the equation I was missing.
Thanks for clarifying this issue.
Alexander
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Alexander (Fl)
Posted by Alexander (Fl) on January 15, 2002 at 10:48:14:
Allen,
thanks for the insight.
Again, do you actually have any luck getting the deed from these people by offering them such a small token amount…in Florida?
To be even more clear… - Posted by Ben (NJ)
Posted by Ben (NJ) on January 15, 2002 at 14:00:02:
unless you are an owner, tenant, occupant, junior mortgage holder or judgment holder of the property you would not have the legal right to redeem the lien. Some astute investors years back in NJ were able to circumvent this when they discovered that the property owner had died, they tracked down an heir (who couldn’t care less about the property) and purchased his legal interest in the property for token consideration, and then redeemed the lien, thereby frustrating the foreclosure (not to mention the lienholder LOL !)and acquiring the property at the cost of a couple of years of back taxes. This has since been deemed illegal in NJ and is known as “heir-hunting”. Make sure your state has no similar prohibitions before going this route.
Re: Hostile Takeover of Tax Lien Certificates? - Posted by SuperCat (IL, KY)
Posted by SuperCat (IL, KY) on January 15, 2002 at 13:37:05:
The owner can redeem as he owns the property. 3rd party has no interest in the property. You don’t pay the bank anyway. You would pay the county, the fact that a bank owns this certificate has you mixed up as it doesn’t matter who owns it. Once county gets paid then they repay lien holder.
Re: Hostile Takeover of Tax Lien Certificates? - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on January 15, 2002 at 20:50:31:
Alexander–(FL)------------
You have to think in terms of vacant lots and vacant land, not homes. Over 90% of tax delinquent properties, in my experience in several different states, are vacant parcels. Most of the improved properties are in poor shape. Most of the homes will be redeemed. Probably well over 99% of decent properties will be redeemed.
Why don’t you call up some private mortgage brokers and see if you can find some mortgages to buy which are scheduled to come due in about a year? You might make about 12-14% on your money.
Good InvestingRon Starr*******