tax liens

[BoliverAllmon]

has anyone here ever worked with tax liens? My dad is getting interested in it and he says you can get houses very cheap this way.

[i_m_robot]

would want to play around when it comes to taxes

could end up owing a lot of money



Whats a tax lien?

[BoliverAllmon]

a tax lien goes like this.

a person doesn't pay their taxes. a government agency comes in takes their property and puts it up on an auction. I would go to that auction and bid on the property. The bids start out at the price of their backed taxes. Now, say I win the auction. I can easily get an 80,000 dollar house for 15000 bucks. Now, the person that owes the backed taxes has between 6 months to two years (depending on the type of property) to pay back the price that I paid for their property plus 25% interest. If they can't pay the money in the timeframe, then I would become the full owner of the property. I would then file for a clean deed (which means no back taxes or mortgages or owed) at that point, I could either sell the house at full market value, rent it out, or blow it up. It is my choice.

boliver

[Siberian Husky]

i love these holes in the system, i used to utilize loop holes left and right when i was a mortgage consultant..great stuff..

although it sounds VERY VERY possible..theres an obvious risk of not buying the house back at the price you desired..and also im sure the goverment would find out if you did it so many times..i'd try it though..definately

[athykay]

Haven't done it personally, but you can get some real deals (and steals) on real estate if you are lucky.  Problem is, you have to have the cash available to make the purchase at your bidding price - no time to run around trying to procure financing.

I know of a house in Maine up on a cliff overlooking the ocean that went for a palry 50K about five years ago.  If the place isn't worth ten times that now, it's worth nothing.

Bottom line - if you have the cash at the ready, it can be a great way to spin money.  Leads to the old dictum:  You gotta have money to make money.

[BoliverAllmon]

i love these holes in the system, i used to utilize loop holes left and right when i was a mortgage consultant..great stuff..

although it sounds VERY VERY possible..theres an obvious risk of not buying the house back at the price you desired..and also im sure the goverment would find out if you did it so many times..i'd try it though..definately

why would the government care?

[Torp]

why would the government care?

They don't.  As a matter of fact, they are the ones that are selling the lien in the first place in order to generate cash flow.

The difficulty here will be to find an untouched market where investors are not already doing exactly what you're talking about.  This strategy has been around for years.  As a matter of fact, many people are using this strategy with their self-directed IRAs.

The limiting factor for your investments will be whether you can sit on it for the time necessary to claim the property (if that's your interest).  Most people invest in these types of instruments for their exceptional rate of return, not for the property at the back end.

[BoliverAllmon]

i'm in no hurry.

[pianonut]

perhaps the fine details, such as floor plans, electrical plans, keys, title to the house ?, some stuff getting destroyed, workability of plumbing and septic.  you pretty much need someone to check the house out carefully for you - before you commit.  i'm not a real estate agent, but just imagining.  also, you might not want a homeowner coming back and trying to reclaim the home (saying they have the title or something) but i don't really know these things.  kind of like repossessed cars.  you don't know a lot about the history.

[athykay]

You don't have to worry much about the prior owner coming back to reclaim.  If all the steps of the foreclosure procedure are followed (and they certainly are when a bank is initiating for delinquency on a note and  it and generally, so when a town is exercising their lien for unpaid taxes), then it's pretty cut and dry.

True that you don't generally have a lot of time for inspections, however, there is always a period during which notice of the proceeding is pending that prospective buyers can come do a look/see.  Again, the key is getting a fire sale price.  The general rule of thumb is about a 30% discount.  But, if you track them over time, you can do much better.

[pianonut]

i'd rather save money on a good interest rate.  www.eloan.com is a good one! you can also check out zero down option at the left side.  basically, you don't want a house that you have to fix-up, imo.  unless,  UNLESS, you are a good fixer or contractor.  it's just a bald headache.  keep looking for good deals on newer homes.  they are UP TO CODE.  some have old electrical wiring (fire-hazard), etc. etc.  this COSTS.

so the price to fix up is not worth the savings! especially if you want to re-sell, and keep levering. i suppose some homes that are tax-liened are in ok condition, but you want to be able to take your time in checking out the home.

[BoliverAllmon]

yeah I definately don't want a P.O.S. I was thinking that subdivision homes are a "safer" bet. subdivsions require houses to maintain certain upkeep. just thinking here.

a loan with a low interest is a good deal, but not as good as getting a 140,000 dollar house for 30-40 grand.

boliver

[pianonut]

my brother bought a modular home.  they were around that price, and i was surprised (visited a month ago) at how unmodular they look.  for instance, i thought there would be a line down the middle of the ceiling.  no such thing.  the modular homes today are very amazingly good looking and i think this one had three sections.  large windows.  really great.  he put alot of effort into finding the home he wanted, paid for shipping it to location, and unloading, setting on basement (that he made), and all - so there was a lot of work to it.  but, since my dad is an engineer, they had a good time.  it looks great on the outside and inside. 

hope that your dad gets some good homes to look at.  paying an appraiser might be an idea.  tell them to pretend they're a relative - and maybe they'll kick the walls in the closet when no one is looking.  mold and mildew are a common problem in climates here.  a newer home usually doesn't have it.  also, here they check for radon.  if your house has it, it's very hard to sell without venting pipe from basement to ceiling.  also, checking the windows (for tight fit) finding out how much INSULATION (which saves you thousands on heating and airconditioning) and checking out the previous owners basic service bills.  it gives you an idea of what you are getting, or potential problems.   

[BoliverAllmon]

I live in a modular home and the thing that sucks about them is the devalue over time where a house raises in value.

[pianonut]

hmmm.  why do they devalue over time?  do they develop cracks faster when the ground settles?  are the cracks hard to fix?

[BoliverAllmon]

I think it is somewhat biased. Also modular homes used to be built really cheaply and therefore fell apart. Now adays they build them better, but they are still stereotyped as hunks of junk.

[mikeyg]

Fighting the power, eh?  I like it.

[BoliverAllmon]

no, I am not fighting the power. I know they devalue. Therefore if I can avoid it I will  not buy a modular home.

[pianonut]

i didn't want one either, really, but i was surprised how great my brother's was.  i really wouldn't have guessed it was modular by looking at it inside and out.

hope you find the house of your choice.  ceiling insulation is good too.  if the house doesn't have it, put some in.  it will save money (again on heating and cooling).  another thing i've learned is that some things that bug you a little, will bug you a lot when you move in.  for instance...there was a spot for the fridge in our new house on the far right of the kitchen.  i said to my hubby, 'how are we going to clean out the fridge, when we can't open the door farther.'  he said, 'we'll change the door on the fridge.'  do you think the door on the fridge is changed.  noooo.  i've been trying to squeeze out the shelves on the fridge for some time, but couldn't get the vegetable bins out.  so, there i go, baking soda and a little water and washing it in the fridge.  i don't like that because it is a constant problem.  why couldn't they put the spot for the fridge in the middle of the kitchen or at least a cabinet apart from the wall?  bad planning.

that's one of the few things i don't like.  most things are great.  oh, except for the tub.  they always LOOK big, but get into them (especially with two people) and you're cramped for room.  sit down in one with your girlfriend and see if you feel comfortable.  most bathrooms don't have a big enough tub even for one person.  that's because they come in a horrible standard size.  (for short people).

last thing that i can think of, is make sure the dining room has enough room to walk around the table!  and that you can close it off from the kitchen (or has a wall or doorway).  it's a hassle to always have the kitchen spotless when you entertain.  very NICE to have it separate - and way for guests to walk from living to dining room.  we had our dining room closed off from the front entry way (there was door there originally).  i didn't like it because i didn't want the dinner to get cold (in winter) from cold air blowing in .  so you walk in entry, then to livingroom, then to dining.  much more formal (and surprises people when they see the table) rather than seeing everything at the door.

[BoliverAllmon]

thanks for the info