Note secured by 2 props-1 sold at tax auction - Posted by Kristine-CA

Real Estate Investing Auctions
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Posted by Ronald * Starr(in No CA) on June 23, 2003 at 16:29:35:

Kristine–(CA)---------------

In CA a property owner cannot get out of an obligation by buying their property at a tax auction or having an “agent” bid for them and buy it a tax auction. This is according to CA state law. Remember, I am not an attorney. It seems to me that the obligation remains on the property or reattaches to the property when the former owner is back into ownership or perhaps when the new owner is an “agent” (the word used in the state law) of the former owner.

If the taxsale took place less than a year ago, you would normally be able to put in a claim for the excess proceeds if you owned the note at the time of the tax sale. If you buy an interest in the property from the owner after the tax sale, there are some specific laws limiting your actions, to prevent property owners from being cheated. I don’t remember if the same laws apply to those holding obligations against the property at the time of the tax sale. You probably need to study the law on this one. You might well want to talk to an attorney who is knowledgeable on this. John Beck is a little in error in his understanding of it, in my opinion. We have a mild disagreement about this part of the law.

So, how well does the remaining property secure the note? You should read the deed of trust, but most of them say that the beneficiary can “advance” the funds to pay the delinquent taxes, then demand repayment from the property owner. If the property owner does not reinburse the loan holder, the note holder can start a trustee’s sale for not keeping up the senior obligation, the taxes.

Good Investing**************Ron Starr****************

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Note secured by 2 props-1 sold at tax auction - Posted by Kristine-CA

Posted by Kristine-CA on June 23, 2003 at 15:17:18:

OK. Here’s one. There is a woman who wants to sell me a note that she is carrying for a buyer of two adjacent properties that she sold 8 years ago. The seller is totally clueless about the paperwork and did very poor record keeping.

But now that I’ve seen the deed of trust, it turns out that the buyer let one of the properties go to tax sale. So now the note is secured by only one property, right? It looks to me like the buyer/payor (or a relative) bought the tax sale property for next to nothing. There will be little or no excess proceeds.

The buyer/payor continues to make payments on time on the original note. So, by letting the property go to tax sale and continuing to pay on the full value of the note, he isn’t saving himself any money. Can’t quite figure out what that’s about. The remaining property is also tax defaulted, but not yet due for tax sale. Perhaps he is planning to let this one go to sale as well and get out of the note?

Anyway, the holder of the DOT just wants out and she and her husband really understand nothing about the note. And the tax sale episode put them over the edge.

Is a DOT still valid if part of the security is missing? Does it need to be rewritten? I can get it at a substantial discount and it’s a pretty good seasoned note. Except for the collateral issue. :slight_smile:

Any thoughts? Sincerely, Kristine