Tax sale Horror!

Tax sales…..Lots can go wrong….

During July 2010 I was contacted by an investor… His request was that I go by homes up for the Ada County tax sale and give him an approximate value.  I investigated 5 or 6 houses.  I also studied tax sales… They are not quite foreclosures.  In Ada county you register via an Internet site.  Then you start bidding… Ada county takes the highest bid and gives you a sheriffs deed.  This title is not insurable right away.  That makes it very hard to flip.  That is the first tax sale horror!  It seems that if the sale is done right and you do all your homework and paperwork you can get insurable title in about a year.   ‘

 My investor told me he did this a lot in New York and wanted to try Idaho.  Now 1.5 years later I have a lot of respect and admiration for this investor.  At first I wasn’t sure what to think.   I shouldn’t worry too much he knew what he was doing.  That was good.  I also felt very uncomfortable about the idea of a tax sale.  I got to thinking who would lose their homes for the want of property taxes and the answers were not pretty….  People who are really old  or sick…..People whose homes were paid off and who are functioning poorly.  You can add people with so many liens against the property that it not salable… I felt bad and did the work but I also warned the occupants that their house was about to be taken away from them.  

One of the families asked me to help… They told me they  only owed the taxes…. The lady inherited the home from her mom and never paid taxes or filed the homeowners exemption that would have lowered the taxes.  Her husband was ill and had been unable to work… Compelling story…. I had them meet with the tax assessor and tried for what political clout I had….I also called a nice hard money person since the taxes were a lot less then the house was worth.  The political stuff crashed and burned so we tried to do it with the hard money.  Turns out they had so many liens and deeds against them that the home was not savable.  Being a tax sale I could only see the outside.  We did not know the condition inside… Another tax sale horror. 

My investor purchased the home and treated the former owner very well.  He rented back to them for under the market price and worked on getting clear insurable title.  He sent me a gift card for my troubles and we kept in contact.  I supplied names of repairmen and such during the year.  The people hoped for a new stove but did get a new roof and water heater.   My workman (who put in the water heater) tried to get into the house to access the condition but only was allowed as far as the bathroom.  The way he treated the former owners, the workmen, myself and the breadth of knowledge this man had is why I am impressed and count him as a friend.  

In June he informed me that the former owners were going to move and he would come out afterwords and access his property.  The idea was to clean and fix it up and  put it on the market and hopefully he would realize his profit.  I did the market analysis and things looked OK not Great but OK.  The house had lost at least $20,000 in value…There still was a profit margin…. the house did back up to a somewhat busy rode without a fence….Not too busy but I did not discount this enough….A fence might have helped (and I told him so).  Losing value while you clear title….Another tax sale horror.

My investor arrived in the end of July.  My friend (and workman) met him…. He and the workman saw eye to eye. Together we decided what needed to be done…  There was a lot that needed doing.  There was a lot of deferred maintenance and a semi trashed home…The furnace had a cracked heat exchange and the sprinklers were creating problems. Every floor covering needed to be replace… All surfaces painted…Doors and closet doors were missing…This was about as bad as it could get.  At least the bones were good but the profit margin was diminishing. No inspection allowed Another tax sale horror.  My workman got the job and I had the listing.  The investor hired out the floor work.  I helped him find the sprinkler guy, the gardener, the HVAC company and others. 

It took over a month but the house was restored to its former glory.  We were all proud of our work… I still thought it lacked a fence but … I was sure when I listed it I would have an offer fast….

As I prepared to list it I looked at the public records… I noticed the home still had liens showing against it.  I approached the investor.  I called my title person and she said that their company would not insure the property and my investor needed something called a quiet title.  This cost at least $3000 and 3 or 4 months and was not fool proof.  My investor told me he was working with a title company and the title was free and clear.  I called his title company and spoke to the title officer who informed me that  his company would be able to give clear and insurable title…. I listed the home insisting we use his title company… Almost had an offer the first day and waited…. The offer didn’t come time past…. In November I got antsy about the title again and again made him check out the title… I was told that the liens I kept seeing were gone. 

With the house not selling we lowered the price…. To what would just get the investor his money back… Finally the offer came in….It was low…It was clean but very low…Being a good agent and a savvy investor we negotiated the offer.  My investor is still out at least $4000.  But now the fun began…..

Fast forward

I asked the title officer to give me a heads if there were problems.  I reminded him about the fact the home was acquired via a tax sale and the owner cleared the title.  The call came at 4:30 PM on Wed. December 21…It has a $50,000 medical judgment that showed up on the home and the former owners…..I asked how could this be…. The title officer told me he had a call into the Ada county tax assessor.  This date was important because it is the day all property taxes in ADA county are due….The office was swamped….I informed the owner but I figure I could wait until morning when I would have  more information to talk to the listing agent.  I gave myself a 10 AM deadline and informed both the title officer and my client of the deadline.  This certainly is another tax sale horror.  I was amazingly calm…. I had done everything I could….I even slept on Wed. night…Usually when a deal seems to be in trouble I lose a nights sleep… This one was in the worse trouble I had ever had.  My client was in danger of losing huge amounts of money…

I emailed and initiated phone calls at 9 AM. By 9:20 AM.  At 9:45 I emailed and phoned the buyer’s agent to stop the inspection.  Needless to say he wasn’t happy but at least he didn’t yell at me and was a professional about the situation.  I have worked with people who have abused me over this.   I gave him what information I had and told him I would keep him posted.  I now knew how the judgment was missed… It was  mistake by ADA county’s title company…. It seems that in September they sent out a litigation report to all the creditors of record…. The judgment came in November with the owners name misspelled…A medical judgment…. The title was dated down and endorsed on December 22, 2009….2 years from the day….. Strange coincidence…. That meant the lien was real….. The title company was certainly liable for $13000 to ADA county but would that help my client.  Title called the other title … I called too…. I also had extensive talks with my client, the former owners, and my broker….I started gathering names of Idaho real estate lawyers….Part of the tax sale horror. 

Late in the afternoon Ada Counties title company admits the mistake…. They give us a couple of options….One is that they will overwrite the problem and insure the property so the sale can proceed.  The second was that they would give my client the $13000 so he could deal with it himself…We are taking the first option and changing the inspection dates and the title company.  Our title company was very nice about it and felt it was our best option too.  I sort of felt they had given my client some bad advice.  So we are in the deal but I will shudder at tax sales. And I am very leery of another tax sale horror.

Now for the inspection and hoping they can find a property pin for extended coverage….

 

 

  Debbie Holmes

Gold Key Real Estate    

(208)761-2551 Email: d5holmes@msn.com

To search Boise Homes visit my website

Tax sales and potential listings….

Today I meet a seller that I started working with for a year but have never met….  How did I start working with him?  How do I manage a potential seller from NY state in Boise, Idaho.

 

  I met my client  that we call Joe last year when he called and asked me about tax sales…. I sort of knew about tax sales but only in the vaguest sense.  This man wanted me to drive by homes that were up for tax sales from Ada County.   Fundementally I was a bit uncomfortable with this but curious.  I reasoned the homes were going anyway and I just might be able to talk to some of the victims and help them.  I must say I did not tell Joe this.   Joe had a list of about 7 properties that looked interesting… Back track….

How do tax sales work in Ada County?

Every year the tax assessor sends out bills and most of us pay them…. Either directly or through our lenders.  There are home owners exemptions and even a circuit breaker (which can eliminate your tax bill if you are old or disabled and poor) provided you file for them.  If you fail to pay these property taxes for 3 years in a row (or maybe just be delinquent for 3 years) the county will put your home up for auction.  The notices start going out a long time before and every effort is made to contact the owner.  The county compiles a  list and contracts with a company that is called bid for assests.  If you are interested you go to the website (link is at bid for assets).  As the do-good-er I am I investigated the properties  but gave the owners a flier warning them that their home was up for tax sale.  Of course I did not tell Joe I did this.  I met a couple of people who had paid off their taxes.  Their were 2 homes that I thought were good but I gave my opinion on the value of each and its pluses and minuses that I could determine from the outside of the property.  The owner of the nicest property contacted me.  I tried to help him.

It turns out that his wife had inherited the home a from her mother.  He had a couple of strokes and lost his income.  I took the couple to the tax assessors offices.  I called a political reporter I knew and someone who might be able to lend the $25000 he owed the assessor.  The rates were high but at a $200,000  value the home was worth saving even  if to sell.  One problem this family faced was the taxes were twice as high as they should have been because they never claimed a home-owners exemptions.  The assessor was sympathetic but only the full amount would save the home.  The reporter was distracted and didn’t pursue the story.  The lender was willing to lend the money provided the taxes were the only lein and that they went into first position.  Long story short….. The lender called my title officer and Diana did a search. Turns out there was $158,000 in liens against the property that the owners didn’t tell us about…. They lost the home and Joe bought it.

Joe  seems actually to be a reasonably nice guy and I have learned to respect him over the year.  Joe rented back to the previous owners at a bit below market rent and did deferred maintenance.  Now the people have left and Joe wants to sell the property.  I have helped with maintenance issues (supplying my list of repair people) and I have kept him abreast of market conditions both as a rental and sale.  Today I am actually going to meet Joe and see the inside of this property.  I am looking forward to it and hope I get the listing….