At the local tax sale here last fall, I bought a property. I just got the deed for it.

The property was one of many that a local landlord was losing for back taxes. I was the only bidder on any of his properties. Next year's sale will have a ton of his properties free and clear if he doesn't get things straightened out.

Some of you here know this story already.

Anyway, during the weeks before the tax sale, you can go from hundreds of properties on the auction block down to very few.

The auction takes place on Thursday's. On the Monday before, you can have tons of properties and not many by that Thursday by the auction start.

Anyway, it's a lot of leg work researching these properties. So you have to really identify your main targets first and let the others go, so you aren't spending way too much time on properties that may be paid current.

We identified several properties that we had an interest in. We researched the heck out of them!!

Well, the one I got had a major issue slip through!

It has a mortgage on it.

The reason we missed it was because several years ago, the 911 system changed all the addresses around here. When we researched the property, the mortgage was listed under an old address and not showing up under the new one.

Oops!

Fast forward to the sale.

We win the property.

Title gets deeded to me. (Actually an LLC I set up immediately after I found out about the mortgage so it's flying solo.)

Owner expresses interest in getting it back.

I have about $4,300 into it.

He still has a mortgage on it of 50k.

The property is rented.

What would you do?

**side note, a friend of mine from high school bought a property neighboring his house at this same sale. I said to him, "You do realize that this property has millions of dollars in liens on it, right?" He said, "yeah, I don't care." He bought a large chunk of raw land for 8k.

**side note #2. The properties that didn't sell at this tax sale were immediately put on my bulk mailing list for letters and postcards to the

owners. I identify them to be troubled properties.

So what are your thoughts overall?

Ditto what Ken said and I would be very clear on understanding how this slipped through and make sure I had procedures in place so it doesn't happen again.

??? my take on the situation is first owner is still liable for the mortgage, but the bank can foreclose on the mortgage and take back the house. NE is in third position behind the mortgage and taxes (which are now paid).

I'd put on my Nancy Drew hat. Lenders always (except this case) pay the back taxes ... was this one that underwater that the bank was never getting anything, even if they foreclosed?

Nicole, what is a UPI?

There is a period after the sale before the deeds are issued where the courthouse notifies the lien holders. The bank would be aware of unpaid taxes before the sale and informed that it was sold for taxes after the sale. So they know.

NE

Tax sales in different states have different rules. Therefore you need advice from the state you are working in after you have not only read but also scrutinized the state statutes.

Here in MO the tax sales wipes out all other liens except IRS and they go away after 6 months (if the laws haven’t changed).

From where I set I don’t see where the bank has a dog in the fight.

Here are a couple of comments from other post. Same author

fake HOA liens (by Ken [NY] ) Posted on: Feb 10, 2018 1:20 PM

Message:

Mike that wouldn't work to protect against a tax lein since the tax lein WIPES OUT EVERYTHING

Tax sale deed whoops! (by Ken [NY] ) Posted on: Feb 10, 2018 5:40 PM

Message:

I would collect the rent until the bank forecloses.

My question = If tax lien wipes out everything then how can bank forclose.

Bank may not care and just writes it off or whatever they do.

I bought a tax sale property a while back, bank had a lien on it for ~ 110 K. It had flooded and they were not interested in the property anymore. The property owner had other liens with the bank and I guess they just moved them over to his other properties. I don’t know and I don’t care.

DOES YOUR STATE TAX SALES NOT WIPE OUT OTHER LIENS provided you gave proper notice? Do you even have to give notice like we do here in MO? Or does the tax sale authority have to give notice?

Just reread your post. So tax sale people are supposed to give notice. DID THEY? Did you go and look at their mailings? I don’t let NOBODY take care of important things like that for me. Too much incompetence.

Hope it turned out well for you.

The county hold the auctions

3 rounds.

1st (which this was) is the upset tax sale. As-is, buyer beware. Liens attached

2nd is judicial sale. At this sale the judge has wiped out liens and the property is free and clear. The houses are rougher by the time they hit this sale as its 3-4 years after the taxes have been paid at all.

Ken (NY)

Not a problem. We can’t know all the tax laws in all the states. We just need to know (very well) the ones where we are buying.

I have looked at tax sales in several states. Some I would buy in if I took the time to dig a little deeper, some I wouldn’t touch with a 20 foot pole.

Few years back I was in the National Guard and went to WV to teach a class. While there, and on my free time, you can guess what I was doing. That’s right. I went to the tax sale place and looked at their laws. Surprising but at that time they were very close to what MO had.

Michigan sounds a little like what NE is running into. Don’t think I would buy there.

You mention that in your area the tax people take the property and then sell it. I am guessing you are saying the state or county (the tax people) take possession, get the deed in their name and then sell the property. This is what Arkansas does (or did the last time I checked). AR also has a sale every month. Here in MO our tax sales are once a year. The same day for the entire state. Too much to keep up with.

Whatever you are doing just keep on keeping on.

There are several people on this board I would like to visit with someday. I have your name marked down.

NE

I guess there could be a profit in buying a property at the first auction IF you have done a good job of searching everything out (something you have now learned). It sure is expensive if you have to have a title search done for each property you are interested in buying at the tax sale and then you don’t get the property.

We had a guy down here that went to the tax collector’s office and paid the employees to do a quick title type search before the tax sales. Didn’t pay much but didn’t get much. Nothing guaranteed but gave him a feeling of security I guess. I don’t check nothing out. I do a quick drive by and that is the extent of my research. For my county I can do my “due diligence” in about 4 hours. County runs about 60 – 75 properties last two years. Of course all liens are wiped out so I don’t have to worry about that. EXCEPT IRS liens and then they go away after 6 months.

I have started getting a little more selective in what I bid on. Used to be I would bid on about anything that came along. Used to buy 20 to 30 certificates a year. Maybe only end up with 2 – 4 a year.

After redemption period I would list them for sale and didn’t do a thing to them. You guys make more money that I do and your properties look much prettier than mine. If I can buy something for 450$ to 700$ and sell it for 10K and upwards that’s my game. My worst was I gave 250$ for a property and sole it for 500$. Just decided I wanted out. My best was I gave ~3800$ (hundred) and sold it for 60K. Did nothing but mowed the yard for the summer.

Enjoy your post and ramblings. One day would like to visit but you sure are a long way from MO.

NE of PA it sounds like you bought at the 1st the upset tax sale. So now you have two issues to get the bank paid off and to get the delinquent owner off the deed. Both bank and owner have an interest in the property. And now NE has an interest in the property and you are 3rd in line down the list.

Call the owner back and tell him you will sign a quit claim deed for $10,000 or whatever the amount you will make some money for your time and money in the property. Otherwise the bank may foreclose and NE gets ZERO.

the property was foreclosed on... your name is on the deed. It's yours. The loan is still against the man who lost it at the tax sale, the bank did not step up and buy it's position. The BANK may try and reach out to you to buy it back or they may just hold the man with the loan with the bank accountable. As long as he pays the payment why would they do anything! That's pretty simple.

You do not own the money to the bank or to the seller. Tax lien's trump bank loans.

Tom, the deed is out of the owner's name and into my LLC. That happens automatically after the first round sale unless the owner schedules a hearing with the judge.

I don't care if I get the house. My intention was to throw it on the market for 25k and dump it. Full market maybe around 55-65k with work done. I'm doing any work. :)

The mortgage is still in the previous owners name.

i have bought a few houses from OCWEN... it was easy.

so you are saying you own the first tax sale position.

in my state i would have to hold my position for 2nd and 3rd and would not get actual deed until 3rd tax sale and a redemption period.

The deed is in my LLC's name. I have it in my possession. It is no longer in the previous owners name. He still has the mortgage on it. The bank still has it as collateral.

NE - the UPS is the uniform parcel identification number. look at the top, probably left side (but not always) of the face page of your newest deed. they started with these numbers maybe 20ish years ago in the different counties so that when the recorders all came into the computer era it would be easier to track properties. using the address, you need to manually look up the mortgages, the deeds, etc. plug the upi in to the computer and a list of all activity on the property shows up

yea, that's what I meant ... first/upset ... second is judicial.... brain fog this week down here.

Yes, they'd have to file a foreclosure action against your LLC but I'm 99.99% certain they'd be in the right. that is the purpose of a mortgage - it attaches to the real estate. the Note obligates the signer. the Mortgage obligates the property. Lender really doesn't have any reason to make a deal with you ... other than it will remove the property from their books quicker.

not sure who would buy from you in your quick turn around. I'd see if the lender wants to make a deal

And that's what brings me to this post Nicole. The quick turn around option is no longer there.

NE of PA, Yes the TAX DEED is in your LLC name. The bank is first position. The owner is in 2nd position AND you are in 3rd Position. I guarantee you if you had a buyer for the property the title company would not give title insurance because there are 3 clouds on the title; the owner, the bank and you. The title company would want a quiet title action done on the property, UNLESS you paid off the mortgage and got the delinquent owner to sign a quit claim deed then you wold have no problem selling the property for $50 to $65K.

On Monday call a title company in your area talk to them about the property.

Call the delinquent owner and start at $10,000 or what ever the amount you think you will make money on the property.

Yes the $25K or $50 to 65K would be great IF the bank was not there. AND the owner either signed a quit claim deed to you OR you did a quiet title action. I can bet you with a quiet title action the court would rule in the favor of the delinquent owner.

Plenty

From what you write I will have to guess (I try to avoid the word assume) you are either in the St. Louis or K.C. area for tax sales.

Some states are a tax DEED state and some states are a tax LIEN state. MO just happened to be both a tax deed state and a tax lien state.

St. Louis and KC do tax DEED sales and the rest of the hinder land does tax LIEN sales. I only work with tax lien areas therefore I do not know how tax deed areas work. I cannot, with any kind of knowledge, get in that discussion.

However it is interesting how you describe how tax sales work in your area. I had no idea there was a 1,2,3 position. Thanks for the insight.

I think I will avoid the two areas.

Tom, I'll check, but I don't think I need a deed from the owner.

Here is how the deed reads:

Tax Claim Bureau Deed: Corrective Deed (tax claim messed the first deed up)

This Deed, made this 29th day of January 2018, between the Tax Claim Bureau of the county of _____, as trustee, hereinknown as the GRANTOR, and NEPA LLC, herein known as the GRANTEES,

Witnesseth, that in consideration of $3,703.87, in hand paid, receipt whereof is hereby acknowledged, the GRANTOR does hereby grant and convey in fee simple unto the said GRANTEES, his heirs and assigns, the following lot of land with appurtenances.

ALL THAT CERTAIN PIECE OR PARCEL OF LAND situate in the township of _______, county of _____, and state of Pa, described as follows: parcel number 12334567899, assessed under the name Mr and Mrs Previous Owner former deed book 123 page 567, the same having been sold by the Tax Claim Bureau to the said GRANTEE on the 14tg day of September, 2017, by UPSET SALE pursuant to the Act of July 7, 1947, P.L. 1368 No. 542, Real Estate Tax Sale Law, as amended.

In witness whereof, said GRANTOR has hereunto caused this Deed to be executed by its director, the day and year first above written.

Signed, sealed, and delivered by: Mrs.. Tax Office Lady

NE of PA, Find the best Real Estate Attorney in your area. Call him or her and make an appointment to talk with him or her, the cost of the education he or she will give you will be worth it.

Maybe the title search company you talk to will give you the full picture of TAX DEEDS. However, if not the cost to pay the real estate attorney will be worth the education.

Yes the house is yours via the TAX DEED but there are two other clouds on the title the bank AND the delinquent owner. NO Attorney in the state of PA would let their client buy the property from you without a quiet title action, this will remove the delinquent owner or a quit claim deed removing the delinquent owner. AND the cloud of the bank.

3 clouds: Bank, Delinquent Owner and Your New Tax Deed.

Your best option at this point is to take $8,000 to $10,000 or start at $12,000 from the delinquent owner and sign a quit claim deed. The bank will not talk to you unless you have a check in the amount of the unpaid mortgage amount. THEN the delinquent owner will be delighted you paid off his mortgage to the house. The real estate taxes were delinquent for at least two years. Maybe the mortgage is less than $50K IF this was the original amount of the mortgage.

Tom, I understand what you're saying. I have had several conversations with one of the best RE attorneys in the state regarding this.

I'm not really concerned about the clouds on the

title. Re-selling the property is not on the agenda unless it's back to the original owner.

If he can't or won't take it back, I'm looking at my next options.

At this point it's either he gets it back or do what Ken suggests until the bank takes it.

It's a matter of limiting losses at this point.

Worst case scenarios, I do nothing and it goes back for back taxes in 2 years. If I can make money on it in the meantime, it's probably worth renting it out and paying the taxes and insurance.

NE said “Worst case scenarios, I do nothing and it goes back for back taxes in 2 years”.

Be sure to check into this. Here in MO if we have any property that has back taxes due on it then we can not purchase in ANY tax sales until taxes are paid. YMMV

Mike, would that be you personally or the llc that holds title that can't purchase at tax sale? Probably a loophole.

Now if this was a Free and Clear Sale Yes the owner would be out of the picture. Not the Tax Deed.

Ken of NY, The Tax Deed in PA does not remove the former owner. A quit claim deed will clear the former owner or quiet title action may clear the former owner depends on the court.

Ken of NY in PA the former owner is NOT out of the picture.

Tom, if what it are saying is correct, what ground does the previous owner have to stand on?

I did not hear any mention of the previous owner being a part of the equation while talking to the attorney.

I did hear that I do in fact have the right to collect the rent.

This sale may trigger the "due on sale" clause in the previous owners mortgage and kick start that foreclosure. That's fine, if I do nothing, I lose a little money. I want to be proactive though. Selling on the market is not an option at this point. Also, if I were to sell, the previous owner wouldn't be a part of that sale and wouldn't have to sign anything. Regardless of a mortgage. What if he was deceased?

The potential foreclosure is why the previous owner wants it back into his name. He gets that. I get that.

I think the previous owner is only in the picture if I were to SELL the property to anyone else and that connection is only through the mortgage.

Ken, the way I understood it from the lady at the tax claim office is that as soon as the gavel drops, it's a fine deal unless the owner petitions the court and the judge lets them cure it. That time is over.

The reason I know this is because I found out about the mortgage and asked if I can't simply give it back to the owner because I found that mortgage. Tax claim lady said the owner can't get it back unless he petitions the court and asks for a hearing. He did not.

Good or bad scenario, I'm now the proud owner! :)

NE of PA, I would take what the tax claim lady said with a grain of salt she is not an attorney.

My point is the tax sale deed is not a clear deed and the delinquent owner to have him removed completely there are two ways for it to happen. Quit claim deed or quiet title action as I said call a title company and ask them IF the property was sold the Tax Claim Deed is it a cloud on the chain of title? IF a quiet title action was done on the property the delinquent owner could get it back via the court depending on how the court rules.

IF the delinquent owner is living in the property and you evict him his attorney could fight it and possibly win.

If the bank would start foreclosure on the property it would most likely take 2 years for the process.

NE my point is there are options for you to remedy the cloud on the chain of title. 3 clouds are bank, delinquent owner and tax deed. To remove the delinquent owner he can sign a quit claim deed. That being said it depends on the balance of the mortgage. And the delinquent owner may share that with you. You may be able to get the property for a lot less than you think from the bank and it will help the delinquent owner get out from under a bad financial mess. OR like Ken mentioned you may be able to get $10,000 from the delinquent owner; maybe ask for $15,000 and he may give you $12,000. IF he's delinquent on his mortgage and was not paying the taxes too. Then I doubt he will pay you $8,000.

IF the house is vacant you could rent it out as Robin mentioned get your money back. IF the house is worth $55 could you get $550 in rent?

NE my point is you have several options and depending on what you want to gain from the property. Make money of course. You could make more money too. The only varible is the balance on the mortgage at this time.

Best of Success with the property.

Tom, there are a couple things at play here. I have no interest in clearing any clouds to the title. Not in this situation.

The previous owner IS REMOVED because he has no responsibility any more in regards to paying the taxes on the property.

I paid his taxes, water/sewer bill and costs in trade for his deed.

His redemption period has passed.

If he had the money to sue in court to take title back, he should've just paid his taxes. He would have to pay them anyway to get it back if he did sue. At that point, I would be refunded.

It's not like the judge is going to say, "Oh Mr. Previous owner, it sounds like you fell on hard times, here's your deed back."

That's not going to happen. Also, if he has the money to fight it in court, he should just buy it back from me. I'm a willing seller.

If there was no mortgage on the property, I'd list it tomorrow and sell it and not worry about getting any additional paperwork from the delinquent owner or what kind of deed it was.

One thing I did learn from the attorney is that in Pa, a bank has up to 40 years to foreclose on a property.

1) Collect rent using the LLC.......if the LLC is small then -

2) Don't pay the taxes on the place and let it go to judicial sale.

3) Pick up the property free and clear at the judicial sale in your IRA trust.

If the LLC is larger, then just understand that you took the place subject to the existing mortgage. Bank isn't going to be excited, but they typically don't track you down if you are paying on it. The over arching Question - How much equity is in the place and how much pain is it causing?

Ray, the LLC is small. I set it up specifically when I found out about this mortgage so it was mixed in with my other properties incase this deal goes south.

It's past the point of no return as far as the judicial sale is concerned. Taxes are paid then and there. The only way to let is go now is to not pay the taxes on it since I am the new owner.

I have bought 2 suicide houses in the past, I'd buy

I don't think I'd let it go back into delinquency on the taxes unless the bank started foreclosure.

Off the top of my head I can think of two ways to proceed. 1. Collect rent, pay taxes, insurance, municipal charges and don't spend a lot on improvements. Deal with foreclosure when it happens. I'd first verify that I personally couldn't be held responsible.

2. Try to work out a deal with the lender.

NE

With that kind of mortgage on the house was the previous owner supposed to be paying the taxes and Insurance or was he paying into an escrow and the bank was supposed to be paying the taxes and insurance.

Could be another angle to look at.

I bought a TS property a while back at tax lien sale. Waited the redemption period, did my notices and had dotted all I’s & T’s. I was in high cotton. About two months after getting the collectors deed the bank called me and wanted to buy the property back. I had given $2500 for property and bank offered me 8K. Seems like the guy was paying his taxes and insurance into an escrow account and bank had let the ball drop. And it was a very heavy ball. I turned them down. Couple weeks later they called again and offered me 12K. A little later they offered 15K. We are on roll now. Keep it coming. I finally sold it to the bank for 25K. They had made a mistake and I guess the regulators were looking after them.

And here is the funny part. During this fiasco the guy and his Mom both got sent to prison. So the bank unloaded it to someone and within three tears it was up on the chopping block again. I bought it the second time, again for 2500. This time I sold it to an individual for 14K. It’s gone now but just shows what can happen. I miss that property.

So make sure the guy wasn’t paying his escrow and the bank makd a mistake. You could come out smelling like a thorny rose.

Section 618 of the 1947 tax law. I just read it.

Lawyer time. Again. :)

My intentions were not to sell the property back to the owner when I bought it at auction. I planned on wholesaling it.

So the after the fact scenario has changed due to this, but I'll get it figured out.