Anyone have experience in a tax lien auction

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Anyone have experience in a tax lien auction

Postby retired recently » Fri Dec 21, 2012 1:22 pm

I live in NC and have several small lots that I have held for a few years. I have no intention to do anything with these lots and will sell them at some stage. They are not worth a lot of money so I have not gotten around to doing anything with them. I received a letter from the county that an adjoining lot will be auctioned off at the courthouse to recover back taxes and admin fees.

My lots have power lines running down the middle so getting this extra lot could help me sell them all in the future. The tax value is listed at $8100 which I think is high. The taxes owed are a bit over $1K. I would probably be willing to put in around $5K but wonder how much legwork needs to be done.

The owners are listed as the "unknown heirs of John Smith". Presumably the winner could face a lawsuit from the heirs if they ever surface? It would seem that the property passed through an estate so it seems reasonable their should be no mortgage on it.

Any advice would be greatly appreciated. I do not want to spend a lot on lawyer fees for a property I am not willing to bid too high on.

Thanks for considering.
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Re: Anyone have experience in a tax lien auction

Postby aja8888 » Fri Dec 21, 2012 1:26 pm

If the County forecloses on the lot and you buy it on the courthouse steps for back taxes plus++, I presume you will get a clear deed. I would also believe if there are any unpaid mortgages on the land that they would be in the deed records.
Last edited by aja8888 on Fri Dec 21, 2012 1:29 pm, edited 1 time in total.
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Re: Anyone have experience in a tax lien auction

Postby pshonore » Fri Dec 21, 2012 1:28 pm

I've always heard the original owner(s) have 1 year to "reclaim" the property by paying whatever price was realized at auction plus reasonable interest. I'm sure this varies by state.
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Re: Anyone have experience in a tax lien auction

Postby retired recently » Fri Dec 21, 2012 1:43 pm

I would happily pick it up at a bargain and wait for a year to see if they reclaim it. I doubt I will do anything with the other lots for at least a year. I realize you are not certain this is the case in NC but as far as a possible downside, it is not a bad one.

Thanks
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Re: Anyone have experience in a tax lien auction

Postby MathWizard » Fri Dec 21, 2012 4:09 pm

Tax lien auctions are risky ventures.

The county sells you the tax lien at an auction starting with the amount of taxes owed. The owner
has one year to pay the taxes plus interest (sometimes as high as 18%).

What almost every bidder would like is to get the tax lien at cost (that is exactly at the taxes owed) and for the
owner to pay up at the end of the year with interest=18%, so they make 18% on the money.

What ususally happens is that :
1) the auction gets bid up so that you make very little over what you would make in investments which are relatively safer, or
2) there is something wrong with the property that makes it hard to sell, so the owner is just walking away from it, and
you end up owning it when you had not intended to (and maybe you have to let it go for the taxes).

Since you actually want the property and these are bare lots, that is better. At worst, the prce is low enough that
you end up getting some decent interest, at best, you get the land (hopefully cheaply).

The fact that the lots are bare avoids the issues of evicting someone if they don't pay, since that can be an involved
and expensive process.
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Re: Anyone have experience in a tax lien auction

Postby retired recently » Fri Dec 21, 2012 4:19 pm

Thanks MathWizard. I am quite happy to have the lot for about $4-5K in total. There are presumably 2-3 other adjoining owners that feel the same way. If my risk is only that someone pays me back then that is ok. Do you have experience in doing this or know someone that has done it?

If they only have to repay me the back taxes does that mean I have to ensure I do not pay more than the amount of taxes due plus small interest? In other words if they owe $1500 and I pay $3500 can they get the property back for only $1500 plus interest?

Also, any idea if the county provides clear title or could there be other liens against the lot?

Thanks again.
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Re: Anyone have experience in a tax lien auction

Postby OAG » Sat Dec 22, 2012 9:37 am

There is a difference in purchasing a "tax lien" and a "property at a court house steps sale". Tax lien purchases can lead to future ownership but Court house step sales are generally final. I think OP may be embarking on a "final" purchase but some of the information given seems to be related to a lien situation.
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Re: Anyone have experience in a tax lien auction

Postby aja8888 » Sat Dec 22, 2012 9:43 am

OAG wrote:There is a difference in purchasing a "tax lien" and a "property at a court house steps sale". Tax lien purchases can lead to future ownership but Court house step sales are generally final. I think OP may be embarking on a "final" purchase but some of the information given seems to be related to a lien situation.


Yes, from his original post it sounded like a foreclosure auction, at which time the land sold off. He needs to make it clear as to what this means "....that an adjoining lot will be auctioned off at the courthouse to recover back taxes and admin fees".
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Re: Anyone have experience in a tax lien auction

Postby retired recently » Thu Dec 27, 2012 9:05 am

I have a call in to the person responsible for the county, she is listed as working over tax foreclosures for the County Tax Department. This department sent me a letter which is titled as a "Tax Foreclosure Auction" and within the document states it is owned by "unknown heirs of XXX", further it states "property to be sold for taxes due plus the administrative cost of the foreclosure."

My key concerns/questions are:

- if I were to win this auction, can I be assured there are no other claims to the property (it is a vacant lot) or do I need to do a title search, the values are small so I do not want to spend a lot of money on this
- a reply above indicated that the owners have one year to pay back the taxes plus interest and then they would get the property; if they owe $1k yet I pay $3K for the property presumably they would have to pay the amount I paid?

Sorry for any confusion in my posting.

Thanks
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Re: Anyone have experience in a tax lien auction

Postby OAG » Thu Dec 27, 2012 10:20 am

Ask the person you called when she returns your call or her supervisor if she is not clear in her response. I personally think this is a clear "on the steps sale" without redemption possible (baring some type of error on the county's part) but it is your money not mine.
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Re: Anyone have experience in a tax lien auction

Postby retired recently » Thu Dec 27, 2012 10:24 am

I finally reached the person responsible. It seems as if the county has searched for the heirs for some time and had no luck in locating anyone. The property has no other liens so it will be auctioned on the steps of the court house and the winning bidder gets the title. There is a 10 day upset period during which someone could outbid the winning bid but it must be by $750.

Thanks for your help.
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Re: Anyone have experience in a tax lien auction

Postby weesa20 » Thu Dec 27, 2012 11:06 am

I have participated in several in Durham. It is true that they are "on the steps" and there is no resemption period but there is a 10 day upset period so you can go on the 9th day and bid. You don't get a warranty deed- I think it is a special deed through the county commissioner. The owner cannot (or have somebody else) participate in the auction. Lots are easier than houses b/c you can inspect the lot but not the houses. I think the winning bid often reflects the value- often they sell for what is owed in taxes at the live auction but then get bid up in the upset periods- Although one house we bid on sold for 73k and was on the market 6 mos later for 200k- so there are deals out there. Oh and since it has already been through the court system it is very hard for the owner to sue afterwards.
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Re: Anyone have experience in a tax lien auction

Postby retired recently » Thu Jan 24, 2013 8:12 pm

Just to follow up - I bid in the auction today and was the only bidder so I got the property for the taxes owed plus admin fees. I could be upset in 10 days, I doubt it though as the lot is not too nice and only an adjoining owner would really want it.

I did not realize there was one being auctioned just before mine, it seemed like a very good deal. Nice half acre lot, sold for $2k. I may upset this one after I go look at the lot.

Thanks again for the feedback.
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