Tax Deed FAQ: “Am I responsible for the outstanding Association liens on a tax-deeded property in Florida?”

Not too long ago we spoke with an investor who had found the perfect condo going up for sale at an upcoming tax deed auction but had immediately lost interest once he discovered a large outstanding condo association lien was attached to it. He realized his mistake when we told him this:

 

The tax deed purchaser is NOT responsible for past Association liens and there is ample support for this in Florida Statutes.

The issue of tax deeds and Association liens has been heavily litigated in FL for years, but now it is pretty well settled law. Association statutes Chapter 718 & 720 impose liability for past due assessments in relation to property acquired by the transfer of title, however, a tax deed does not represent a transfer of title but the commencement of a new, original and paramount title.

 

The courts ruled in favor of the tax deed statue, as it is more specific in addressing the key issue of their survival or extinguishment after issuance of a tax deed and any conflict must be resolved in favor of the more specific statute.

 

The majority of the time when we see a tax deed purchaser have an issue it is due to human error in recording an Association claim of Lien for past due amounts AFTER the tax deed sale or the Association simply forgot to tell their attorney the property had been sold at a tax deed auction so they continue to try and collect the debt they believe they are owed. To catch these mistakes check the dates that they are claiming for assessments and other back due amounts.

 

You are only responsible for the Association dues from the tax deed sale moving forward.

 

Our attorneys at Cleartosell have formatted a standard letter for our clients when an Association makes an improper claim for amount due. If you would like a copy of this template please give us a call or email us at info@cleartosell.com and mention this blog post.

 

Click here to watch a short presentation where our Senior Staff Attorney, Megan Schmidt breaks down this topic with examples supporting case law.

August 15, 2017

Posted In: Attorneys, Investing, Tax-Deed

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Do Properties Purchased off the List of Lands Come Free and Clear of Liens?

Some of the more common questions we receive from tax deed investors involve the list of lands and escheatment tax deeds. In this post we breakdown what the investor needs to know about purchasing tax deeds from the list of lands.

 

What is the List of Lands?

If there are no bidders at the public sale for the tax deed, the certificate holder is given the option to pay the remaining balance and take ownership of the property or pay the costs to re-list the property at a subsequent auction.

If the certificate holder neglects to do either within 30 days after the original public auction, the Clerk will add the property to a list entitled “lands available for taxes.” These properties can be purchased “over the counter” for the minimum bid advertised by the Clerk.

 

What about the liens?

If a property is purchased off the list of lands, the same rules apply as if the property had been sold at auction, as far as lien survival. In general, the majority of liens and interests such as mortgages and judgments are extinguished by the tax deed sale, but the county and municipal liens remain. Any easement and covenants that run with the land also stay attached, just as if the property was purchased at auction.

 

What is an Escheatment tax deed?

After the property has sat on the list of lands for at least three years from the date of the original public auction, the land will escheat to the county free and clear. The Clerk will execute an escheatment tax deed to the Board of County Commissioners and liens of any nature will be deemed canceled as matter of law. Easements and covenants that run with the land will still remain attached.

Purchasing the escheatment tax deed is the only way we have seen to extinguish the existing governmental interests by operation of the sale itself.

 

At Clear to Sell, we are continually developing unique ways to save tax deed investors like you both time and money. If this information has been useful, please visit our YouTube channel to see our principal attorney address this topic in an episode of our educational video series: Tax Deed Law Made Simple

July 26, 2017

Posted In: Attorneys, Auctions, Investing, Tax-Deed

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The Positive Impacts of the Tax Lien System

Local Governments depend on property taxes for funding of the critical services we all rely on like public schools, road maintenance, public safety and healthcare, to just name a few.

So what happens to a community and its services when property taxes go unpaid? Well you wont be surprised to learn that delinquent property taxes impede the provision of important government services and the local government’s fiscal health declines.

So how is this degradation in service provision prevented? Many governments use the sale of tax liens to reclaim this missing revenue and ensure continuation of service provision to their citizens.

But unfortunately, tax liens sales have a negative reputation based on the misconception that they cause homeowners to lose their property to greedy investors.   This is not true. The vast majority of homeowners are forced into action to redeem the lien by payment of back taxes. With some minor inconvenience to the homeowner, everybody wins – the government collects enough tax dollars with which to fund public services, and the homeowner keeps their homes thus stabilizing neighborhoods.

Cities like New Orleans who have aggressive tax collection efforts prove highly successful at recovering taxpayer dollars and raising revenue to go toward resident’s top priorities.

New York City is a shining example of a successful tax lien system. Since implementing a lax lien securitization system they have secured a collection rate of almost 99 percent!

Only properties that are not redeemed are sold to new owners by way of a tax deed sale, and in most cases the new owners will improve the homes and pay the property taxes in a timely fashion.

Overall tax deed investors help eliminate community blight by reclaiming and improving vacant or dilapidated properties and paying back the delinquent tax revenue the local government needs to improve crucial public services like schools and hospitals.

We encourage you to do some research into the way your local government handles their tax lien sale process and to request information on how to get involved if you are interested in becoming a tax deed investor yourself.

March 20, 2017

Posted In: Auctions, Investing, Tax, Tax-Deed

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Holding your tax deed investments? Why you still need title insurance.

It is common for a tax deed investor to dismiss the need for title insurance on tax deed properties they do not plan on selling. But holding a tax deed property without title insurance is putting the investment at major risk of losses, or unplanned costs.

The case for getting title insurance on tax deed property an investor intends to sell is clear. Of course any investor wants to sell their property via General Warranty Deed to a buyer at full fair market value rather than selling via Quit Claim Deed.

But why should an investor secure a title policy on tax-deeded property they don’t plan on selling?

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First of all, if an investor plans to buy and hold a tax deed property and wishes to refinance in order to draw some cash for reinvesting or make substantive repairs to or improve the property, a lender ** will require the property have title insurance.

Secondly, properties bought at tax deed auction are particularly susceptible to risky defects in title by virtue of the fact they are tax deeded and come with clouded title. These types of properties often have issues in the back chain or clerical errors in noticing interested parties.

Think what might happen if a listed or undisclosed heir was missed during the required pre-auction noticing done by the county clerk. That leaves the door wide open for an adverse possession claim by that heir in the future, and without title insurance this could pose a risk to the investment and great financial loss if the claim is proven valid.

The same goes for a mortgage lender. Mortgages are wiped out with a tax deed sale so long as the bank was properly noticed of the sale as required by Florida Statute 197. If a mistake was made during noticing and a mortgage was entirely missed then the bank can come forward and potentially un-do the sale if the surplus money doesn’t satisfy the outstanding lien.

This is where having title insurance on your retained tax deed property is essential.

Title insurance is a one-time purchase providing complete coverage for as long as the insured owner or their heirs hold title to the property. A title insurance policy will satisfy valid claims against the insured title and all legal expenses of defending against the claim.

So, investors in tax deed property should not hesitate to get a title insurance policy whether they plan to sell or not. Because without it, the tax deed owner has limited protection against financial loss from claims coming forth due to clerical errors in the tax deed sale process or defects in the title.

Call us on our toll-free number 1-855-680-4908 or email us at info@cleartosell.com to find out how we are helping tax deed investors all over Florida receive insurable title with our certifications much faster and less expensive than quiet title action!

**Our sister company, Cleartofinance, specializes in refinancing tax deed and foreclosure auction real estate to free up cash for further investment or to improve existing property, allowing you to grow your capital base and acquire more properties sold at auction. Apply today online at www.cleartofinance.com or 1-866-224-7730

August 30, 2016

Posted In: Investing, Tax-Deed


Tax Deed FAQ: “What happens to mobile homes after a tax deed sale of the land?”

You just acquired a piece of land from a tax deed auction and there is a mobile home on it; what does this mean to you as purchaser? Do you now own the mobile home as well? Can you move it off of the property? We have had the opportunity to assist our clients with quite a few mobile home issues lately, and we decided to write this post to help answer a few of these questions for your benefit too.

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The first thing to determine is if the mobile home is included as part of the parcel that you purchased at auction. Some counties will list the mobile home Vehicle Identification Number on the tax deed itself, but other times you will have to dig a little deeper and it is not always easy to establish that the mobile home is part of the parcel of real property.

Some outside considerations to determine if the mobile home is part of the parcel you purchased at the tax deed auction are: 1) Is it permanently affixed to the land? 2) Are standard utilities connected? 3) Has a ‘Real Property’ decal been issued by the Department of Highway Safety and Motor Vehicles (DMV)? 4) Was the property previously claimed as homestead? 5) Was the mobile home owned by the same person who owned the land prior to the tax deed sale? 6) Was the mobile home part of the basis of the taxes that were part of the tax deed sale?

You can contact the local Property Appraiser and DMV for the county where the property is located for more information. In the event the mobile home was sold as part of the parcel, you should be able to go to the Tax Collector with an Application for Title, a copy of the tax deed to establish your bill of sale, and the property card to obtain the transfer of title to the mobile home for your benefit if it has not been retired.

For our clients, we have been able to assist in getting this straightened out with the varying county Tax Collectors and helping them establish procedure for these types of issues.

What if there is a mortgage or liens on the mobile home? Just like any other real property sold at tax deed auction in Florida, the third party interests are extinguished if they were given proper notice of the sale prior to the auction, with the exceptions as provided by statute. If you would like more information on the survivability of various liens, watch our Senior Staff Attorney, Megan Schmidt’s, presentation at the 2016 National Tax Lien Association conference here!

Now, if the mobile home is not part of the parcel of real property, then technically it is still considered to be the personal property of someone else, like a car. The first indication is a ‘Mobile Home’ decal from the county tax collector’s office, and most likely the owner of the mobile home does not own the land where it is sitting.

So how does this second scenario affect you as the purchaser of the vacant land? Since the mobile home is considered personal property of someone else you will need to get the County Sheriff involved in moving the home and/or getting an eviction order.

If you are unable to get the title from the DMV, and you want to keep the mobile home, you would likely need to file a Quiet Title Action in order to obtain a formal decree from a Judge that the mobile home should be considered Real Property and conveyed with the land. The success of this Quiet Title Action will depend in large part on the information you are able to gather from the property appraiser as outlined above, and whether the mobile home is occupied or not.

If you would like more information on this issue or have any other technical questions regarding tax deeds, schedule a complimentary attorney consultation with one of our highly experienced real estate attorneys here!

June 2, 2016

Posted In: Auctions, Investing, Tax-Deed


Don’t Buy Vacant Land at Tax Deed Auction Before Reading This!

Cleartosell recently exhibited at an event where we spoke with a tax deed investor who mentioned that he prefers buying vacant land at auction rather than land with structures on them because of the lower maintenance and easier upkeep involved. Since we normally deal with investor clients who buy single-family homes or condos to flip or rent out, we investigated the issues associated with tax deed vacant land and share our findings below.

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So why should you consider buying tax deed vacant land?

In addition to simplicity of upkeep, there are a few characteristics of vacant land that attract tax deed investors:

No house = less stress (and no tenants!)
If the task of rehabbing and maintaining a house doesn’t appeal to you, then vacant land is the way to go. The lack of a structure on the property comes with an array of advantages for a tax deed investor both before and after auction. The absence of a structure makes it considerably easier to inspect the property prior to bidding at auction and without previous owners or tenants residing there eliminates the burden and expense of eviction after auction. The right vacant land can be essentially a “hands-off” investment and a valuable addition to an investor’s portfolio.

Greater likelihood of buying over the counter:
Some investors would prefer to bypass the live auction scene and purchase tax deeds over the counter instead. The list of lands is a great place to find vacant land at reasonable prices and may be purchased over the counter in the county of choice.
Vacant land is often overlooked at live auction because investors have their sights set on more valuable properties with houses that are auctioned for pennies on the dollar.

This eliminates major competition for investors seeking only vacant land, but be extra diligent in your research when buying from the list of lands. You should first locate the parcel via GIS and conduct a drive-by if possible to be sure you are aware of any major flaws that might have sent other investors running the opposite direction and not simply overlooked from lack of interest.

Tie Up Less Capital
Other obvious benefits such as lower property taxes and requiring less upfront cash to acquire make vacant land appealing. This class of asset can be a great way to get your real estate investment business up and running.

But alas, where there are pros there are always cons, and this type of property comes with its own unique set of risks and down sides to consider.

Beware of legal matters
A tax deed investor we know once bought a seemingly nice piece property only to discover then entire property was a water conservation easement that could not be removed. A property that cannot be used is difficult to sell and can be a massive set back to your business.

There are other types easements to look out for including roads and pathways crossing the land for public access purposes or buried gas pipelines that are transferred upon sale of the property and might be permanent. Furthermore, the removal of easements can get legally convoluted and outcomes could differ depending on specific language of easement, interpretations of the courts, and state law.

Beware of physical constraints
During your pre-auction due diligence look for land boundaries, drainage points, swampland, etc. all of which need to be identified to avoid blindly bidding on a potentially useless property. Assess the potential for existing or future city liens for trash dumped or unsightly conditions from lack of upkeep. Being responsible for years of violations accruing at $200 per day is not an ideal investment!

If you would like further tips on what you should be looking for during pre auction due diligence, request a copy of our due diligence checklist at info@cleartosell.com

Happy Bidding!

April 12, 2016

Posted In: Auctions, Investing, Tax-Deed


How to Handle Code Enforcement Liens on Your Tax Deeded Property

We get a colorful variety of interesting inquiries over the phone day to day from prospective clients about anything from therapy sessions resulting from their investing frustrations to asking about how to renew their car insurance. But one question we find that frequently pops up is an investor calling with concerns about a Tax Deed property they bought, or plan to buy, that has various existing liens or Code enforcement violations on it and how that is going to affect the process of getting title insurance.

There is a lot of confusion with conflicting explanations on what is and is not wiped out at a Tax Deed auction. A common misconception that we hear from newer investors is that all liens are wiped out when they buy a property from a Tax Deed auction. This is not true! In Florida, mortgages, state liens, owners liens and even IRS liens (as long as 120 days have passed) are wiped out in a Tax Deed auction, but the catch here is they are wiped out ONLY if the lien holders received proper notice prior to the Tax Deed auction. (That is a whole other topic alone!) Then there are liens that are not wiped out such as municipal liens that are in the city’s name like water, sewer, and code enforcement liens. These liens may be satisfied with the overbid funds, but if not, the owner of the tax deed is responsible for paying the remaining liens even though it was not them who caused these violations against the property in the first place.

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There are many reasons why people stop paying their property taxes, including a concern that their home is worth little to nothing. Then the property gets abandoned and deteriorates into an eyesore for the neighborhood. Now, because this distressed property has been sitting there collecting daily fines from the city, the tax deed owner becomes liable for thousands of dollars in liens that are going to drain their profit. A client of ours recently discovered that one of his properties we were working on had accrued over $200,000 in Code enforcement liens that had been adding up by hundreds of dollars per day! What does the new tax deed owner do in a situation like this?

Think about it this way: The property has been sitting there collecting Code Enforcement Violations for overgrown grass, or graffiti on the sidewalk because no one is there to fix it up. When that property is bought at a Tax Deed auction, more than likely the new owner of the deed has intentions to fix it up to rehab and flip or rent it out. Therefore that new owner is a friend of the city, not the transgressor. They are coming in with the promise that they will fix up the property, therefore bringing up the neighborhood value and image. By going before a special magistrate with that promise it is possible to negotiate the fines down significantly in sheer relief that the property is no longer their problem. Personal stories from our clients here at cleartosell.com have proven that this method works wonders. One of our clients tells how he went before a Special Magistrate and negotiated more than an 80% reduction in payable liens based on his intentions to rehab the property.

Keep in mind that certain violations such as Nuisance Abatement cannot be negotiated down because of the hard costs made by the city, but Code Enforcements are almost certain to be negotiated down to a reasonable level. So if you win a Tax Deed from an auction and come to find out there is a significant fine for a lawn that went unkempt for years, don’t panic! There is a solution. If you would like specific advice on Code Enforcement liens on a tax-deeded property you own, why not book a free 15-minute consultation with one of our attorneys? They will be able to help you understand the right steps you must take in resolving this issue.

June 22, 2015

Posted In: Auctions, Investing, Tax-Deed


The Importance of Time Management in Real Estate Investing

There are many real estate investing professionals out there that give very helpful advice in solving problems for investors from the beginners to the experienced. Conferences and webinars held by organizations such as National Tax Lien Association are great ways to hear advice from experts in their fields. But just like there are true experts with sound advice, there are also sources from which advice is not as legitimate. Protect your investment strategies and make sure that where you obtain guidance is an accredited source before following it.

After reading about many of the most widely believed myths in the real estate world, a few stuck out as the most common and harmful. One of these common myths that cause investors to give up too early is the belief that investing in real estate is a monstrous responsibility that will drain all of your time. While it is true that it requires dedication and perseverance in order to be successful, if you manage your time right then every second of every day does not have to be sucked up by your investments. One of the best pieces of advice that is given by seasoned investors for time management is to have a clear business plan and goals before getting started. Because each type of real estate has its own set of risks and resources needed, decide what kind you want to invest in so that you may prepare and stay focused. Do you prefer wholesale or Fix and flip? Will you invest in Commercial or Residential real estate? Have all your finances lined up so there are no surprises along the way. In this fast-paced field there is no time for miscalculations on budgets.

So many investors are drained of time and energy because they try to do everything themselves to save money. No one can be a specialist at everything because we are only human. This is why it is important to have a solid team behind you made up of essential players such as a financial partner, a real estate agent, an attorney and a trusted contractor for repairs and maintenance. Andy McFarland, a successful wholesale investor from www.iloverealestatestories.com, gave some great advice on a podcast interview for www.flipjl.com. He suggested hiring a project manager to oversee your projects because managing people alone is a full time job. He explained how coordinating people is a difficult task so having someone with the ability to do that for you and do it on time and within budget is a great resource for your investments. There are sites such as www.Zillow.com, www.angieslist.com, and organizations such as the National Association of the Remodeling Industry that can recommend certified contractors and project managers that fit your criteria and budget.

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As your portfolio grows, so do the responsibilities. The little things start to add up over time and managing the details can get very cumbersome. In the same podcast as mentioned above, Andy told the story of how he slowly brought people on board to help him with tasks. He explained how simply hiring an assistant to answer phone calls alone freed up an immense amount of time and created less stress for him to focus on bigger tasks. Search for personal assistants through friends and family or sites such as www.care.com and www.greataupair.com. You will be surprised how much time those menial tasks actually steal from your day.

Real estate investing does not have to take over your life and drain all your time. There are many time management solutions that can be used to simplify your investments making them quite manageable. It is more than possible to have an abundance of success in real estate if you have a set game plan to focus on and the right partners that have your back along the way. Obviously the recommendations here in may well increase the overall costs of investing, and therefore reduce profit margins, but being sure of a small margin, rather than running the risk of a high margin deteriorating to nothing is the secret to successful real estate investment.

May 26, 2015

Posted In: Investing


The Death of Live Auctions

Technology has a way of simplifying life in the most glorious ways, but doesn’t it feel like sometimes character is lost in exchange for efficiency?

From the late 90’s into the mid 2000’s, there has been a vast shift from counties holding live, in-person auctions toward online bidding auctions through the help of various technology providers such as Grant Street, RealAuction.com and Bid4assets. Not all counties are online yet, but the rate of change suggests that someday soon they very well may be.

There are many reasons that online bidding is more efficient and cost-effective for the clerks. For the bidder it has some helpful advantages as well. For example, since the auctions are online, the bidder’s ability to use the internet’s resources during the auction are extremely helpful in conducting due diligence allowing one person the ability to bid on multiple properties at once. Holding auctions online also eliminates some forms of auction fraud and collusion that may happen during live auctions. The online auctions have proven helpful in a time when county budgets are under pressure.

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While there are obvious advantages to online bidding, (like the ability to bid in your pajamas while eating a bowl of cheerios!!), some seasoned investors can argue the downfalls. For one, the online auctions have high volumes of bidders per auction making the chances of winning a property that an investor spent weeks researching very slim. Elimination of live auctions also cuts back chances to network and meet fellow investors. To many investors that used to regularly attend these events, auctions were fun and exciting. Sandra is one such professional Tax deed investor who runs a Tax Deed Investors club in Florida. One of the exciting things that she does with her group is go on what they call “auction field trips” where they travel around to live auctions in big tour buses. In one of her recent posts to her club’s public Facebook page, www.facebook.com/QueenOfTaxDeeds, she told a thrilling story about the fun that her group had at a Broward live auction but at the end of the post she expressed her club’s disgruntlement with the switch to online bidding. She wrote, “Bad news is the Broward sale is going online in June 2015 ☹ the whole room gave a collected moan.”

The switch to online bidding does solve many problems that live auctions possess. However, at the same time it is spoiling traditions that many investors believe in such as networking with other investors, professional development and weeding out the serious investors from the not so. There are surly others out there like Sandra who are disappointed in the switch to online.

May 8, 2015

Posted In: Auctions, Investing


The Pre-auction To Do List: “Buyer Beware” of property condition

Tax deed investing can be a lucrative industry to get involved in, but like with any type of investing, it comes with its own set of risks. We see first hand how successful our experienced investors are in this industry and want to pass on some helpful tips to the newer investors. So how do successful investors do it so well?

When buying properties for sale at auctions due to delinquent taxes, bear in mind that there are reasons why the owners failed to pay their taxes. While those can simply be that they were having money troubles or have passed away, there are many other possible reasons for abandoning the payment of taxes such as extensive natural disaster damage, or even that it is located in a landlocked swamp. Take the warning “Buyer Beware” seriously. Go to every length to BE aware of the condition of properties up for auction to avoid being stuck with a property that cannot be built on, accessed, or sold!

todo

One key piece of advice any seasoned investor will give is to do your research! Prior to auction day, research the properties on the lists of lands available through the Clerk’s websites and in person. If possible, do a drive by for visible assessment of condition. Many investors have busy schedules and cannot do this themselves. Thankfully, there are companies such as www.realdiligence.pth4.com, www.ebiconsulting.com, and Integra Realty Resources ( www.irr.com ) that will take care of the due diligence process for you.

Select only properties that have a potential for profit. If the cost of repairing the damage would be more than your estimate of the potential fair market value, don’t do it! We have learned from working with investors that it is important to partner with a General Contractor. They will determine the estimates on repairs before buying a property so that you can make sure there will still be a profit after rehab. Pay attention to the location as well. The property may not have much damage, but if it is in a neighborhood overrun with crime or neglect, there may not be any luck in re-selling it.

There are huge profits in Tax Deed investing, but only if the necessary steps are taken when preparing for auctions. Research on each property’s condition is just one of many important things that should be on the Pre-auction to do list, but it is an absolute must to avoid being stuck with a money sink hole (or quite literally a sink hole) of a property. There is no sure fire way of eliminating the risks 100%, but has any successful investor made millions by taking the safe route? With risk comes reward.

April 22, 2015

Posted In: Auctions, Investing

Tags: , , , , , ,