I had so many good questions this week that I wanted to also post the answers to these questions for you. The first is a general question about investing in tax liens and the second is a question that is specific to the state of Missouri.
Mike Asks:
“Is it realistic to purchase a lien with the expectation that you can own the property free n clear? Also would you buy a lien with out seeing the property first?”
Answer:
If you do get to foreclose on a tax lien, yes you will own the property free and clear (except for in states where you bid down the % ownership). The problem is that very few tax liens will not redeem and it is very seldom that you get to foreclose. Tax lien investing is not a good way to get properties. First of all you may have to buy hundreds of liens to actually get to foreclose on one and you have to wait out the redemption period before you can foreclose. In some states that could be 2 or 3 years. Tax lien investing is a way that you can make double digit returns on your money without the risk of the stock market.
If it’s free and clear property that you want, I suggest that you look into purchasing tax deeds or redeemable tax deeds. But regardless of what you may have heard from the “gurus” on late night TV, you cannot purchase a tax deed or redeemable deed for only a couple of hundred dollars. These deeds are bid up at the sale, usually to a certain percent of market value of the property. For example if a property is worth $100,000, the deed can be bid up to anywhere from $20,000 to $80,000 depending on the area and who’s bidding.
About whether I would buy a lien without seeing the property first. I have done this, and I have gotten burned. So now I would only do this if new the area well. When purchasing liens online it may not be feasible to physically look at the property, but you can look at satellite pictures, or better yet get someone to take a picture of the property for you. Still, I would not bid on vacant land without physically looking at the property first.
Heath Asks:
” I live in Missouri and I was told that if I purchase a property at the tax sale that I would be responsible for any debts owed on the property (i.e. unpaid mortgage liens, suits against the previous owner on the property, etc.). Is this true? I always thought that I would only be responsible for the taxes owed. Could you please clarify this?”
Answer:
Missouri is a little different than most tax lien states. First of all to bid at the tax lien sale in Missouri, you must be a resident of the county and owe no property taxes. The interest rate is 10% per annum and only 8% on the subsequent taxes. The redemption period is only 1 year. After the redemption period is over you can apply for the deed to the property.
I could not find any evidence in the Missouri Revised Statutes (Chapter 141) that other lien holders survive the foreclosure of a tax lien. There are 2 ways you can find out what liens will survive foreclosure, ask the tax collector, or ask a Missouri real estate attorney who is familiar with tax liens. I would not put to much faith in what other people tell you.
From what I read in the MO State Revised Statutes, see the?excerpt quoted below, any lien holder can redeem the tax lien, and will be barred from collecting their lien if the lien is foreclosed. This makes me think that would include a mortgage company.
From the Missouri Revised State Statutes:
“141.420. 1. Except as otherwise provided in subsection 3 of section 141.520, any person having any right, title or interest in, or lien upon, any parcel of real estate described in such petition, may redeem such parcel of real estate by paying to the collector all of the sums mentioned therein, including principal, interest, penalties, attorney’s fees and costs then
due, at any time prior to the time of the foreclosure sale of such real estate by the sheriff.
2. In the event of failure to redeem prior to the time of the foreclosure sale by the sheriff, such person shall be barred and forever foreclosed of all his right, title and interest in and to the parcels of real estate described in such petition.”
Happy and Prosperous Investing,
Joanne
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