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Home Investments in Tennessee via Tax Lien Certificates

Posted by teddy9876 (My Page) on
Mon, Apr 2, 12 at 15:09

Hi everyone! I've been doing some research and discovered you can invest in a home (and even end up owning one) via tax lien certificates, or at least you can in Tennessee.

Basically, you bid for the right to own a tax lien, make the initial investment, and then get compensated at a rate of 10% or so. If the owner doesn't pay, you get the property! Just figured I'd share in case it might help someone looking for a totally different way to invest in real estate. Feel free to add more if you learn something new.

Thanks!


Follow-Up Postings:

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RE: Home Investments in Tennessee via Tax Lien Certificates

I would be very skeptical of this. This sounds like a popular scam running around.

Here is a link that might be useful: tax lien scam


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RE: Home Investments in Tennessee via Tax Lien Certificates

Hi Teddy,

I can't speak to the Tennessee laws, but it sounds similar as it is here in MD. It is not as easy as it sounds. I did it for many years.

1) There are professional groups that travel from auction to auction, and they must have unlimited funds, because they bid on almost EVERYTHING.

2) The only thing you will ever be able to foreclose on is probably vacant land. Any probably with a mortgage will never be lost to a tax lein. The mortgage company will pay off the taxes.

3) Yes you can earn a high interest rate. Here it is different by county. My local county is 12%. But most of the time the owners pay quickly and it doesn't amount to much.

4) Many Maryland counties have started bundling properties together so that you are bidding on a group of properties. I guess this is because of all of those "professional" bidders. I think it is unfair, and not sure how it is legal for the treasurer to do so, but I guess they can.

5) Also, yf they owner doesn't pay, you don't just "get the property". You have to file against the owner in court, do a full title search to find anyone else that has an interest in the property. Notify them by courier or certified mail. They have a right to "redeem", meaning they can pay the taxes to keep it from going to foreclosure. You have to take into account the lawyers fees for doing this too.

I have gotten 5 properties this way. Did well on some. Lost my shirt on others.


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RE: Home Investments in Tennessee via Tax Lien Certificates

And what about the mortgage holder?

Don't they eventually show up and foreclose on the property?


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RE: Home Investments in Tennessee via Tax Lien Certificates

"Don't they eventually show up and foreclose on the property?"

You foreclose on the mortgage holder for the unpaid taxes.

Taxes come before even a first.


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RE: Home Investments in Tennessee via Tax Lien Certificates

"And what about the mortgage holder?

Don't they eventually show up and foreclose on the property?"

In most of theses cases, when there is a mortgage, then either they (the mortgage company) did not pay the taxes from escrow in error, or it is one where there is no escrow, and the owner did not pay the taxes (but still might be paying the mortgage payment).

If the property is sold at the tax sale, and foreclosed by the buyer, and the mortgage company does not redeem, then they can't foreclose after it has be transferred. All liens (including HOA dues etc) are wiped out at a tax sale.

A tax sale foreclosure could probably be done quicker then a mortgage foreclosure, so that is why the mortgage companies would always redeem.


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Correction...

Ooops - Except IRS liens.

They are handled a little differently.


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RE: Home Investments in Tennessee via Tax Lien Certificates

SPAM - SPAM - SPAM - SPAM


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RE: Home Investments in Tennessee via Tax Lien Certificates

cas66, I was thinking

SCAM - SCAM - SCAM- SCAM


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RE: Home Investments in Tennessee via Tax Lien Certificates

It is neither spam nor scam. The OP didn't link to any site, and the purchase of tax liens exists in several states. I was on the wrong end of one of those years and years ago.


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RE: Home Investments in Tennessee via Tax Lien Certificates

Not sure it's spam, if he's not pointing to any website.

But I do have a related question: if a house has no mortgage and the owner doesn't pay taxes, and someone else pays the taxes, does that "someone else" have a lien on the house? In other words, can someone basically force a homeowner to owe them the back taxes by paying them on their behalf? What's the law here?


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RE: Home Investments in Tennessee via Tax Lien Certificates

While tax liens exist, the idea of them as investments is a scam. There are several high profile people selling "kits" to show you how to get rich quick through them.

Just think of it this way. If these liens were easy money at 10%, why would the lien holder be selling them? Local governments are starving for money at this point. Even if they were selling, why would the market not bid the sale price up to the point where returns were in line with other investments?

So sure, you could theoretically make some money this way, but the chances of you consistently getting high returns are pretty slim. That just isn't how debt collection works - even secured debts. You have expenses and a certain percentage go bad. If you are doing 10,000 deals, you can absorb some ups and downs. If you are doing 1 at a time, you could definitely "take a bath."


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RE: Home Investments in Tennessee via Tax Lien Certificates

"While tax liens exist, the idea of them as investments is a scam. There are several high profile people selling "kits" to show you how to get rich quick through them. "

This is the scam part.

There are any number of large companies with the sole business of purchasing the liens at the auction.

You are not going to get a very good deal when they are present.
They have normally researched and appraised each property and know exactly what they are purchasing.

The 'package;' system is being adopted to get rid of the properties no one would purchase separately.

By throwing in a few 'better' properties with some real dogs and making the bidder purchase all or none.

This is a common way of doing things in the financial industry.
'Better' mortgages are packaged with some less desirable notes and the while lot sold as one.

The purchaser needs to decide if any losses on the dogs will wipe out gains on the 'better' properties.

Stay away.

Even purchasing REO from note holders can be haze4rdouse to your financial health.


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RE: Home Investments in Tennessee via Tax Lien Certificates

Whatever the correct terminology, anything that is designed to lure me into a "get rich quick" scheme - I call SPAM (and it is also a scam).

It doesn't matter that they didn't link a website. Maybe they are smart enough to know linking a site enables GW to delete the ad quicker. Maybe they expect me to use some search engine and do a search for "Tennessee tax lien certificates" - and then they have me if I am sucker enough to go further.

I hate responding to these things because it keeps it at top of the page. Usually, I report it to GW. I saw a few people responded, and were seeming to be unaware it was a scam. The OP signed up as a new user very recently, and he has never made another appearance to defend himself or deny that this is a scam.

Have a good day everyone!


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RE: Home Investments in Tennessee via Tax Lien Certificates

Tax lien sales can be quite a good investment. Just think, where are you getting 10% return on your investments today. Your return is guaranteed, plus there is a possibility, if you want to pursue it, that you could end up owning the property.

Here is a link that might be useful: Real Estate Tax Lien Questions


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RE: Home Investments in Tennessee via Tax Lien Certificates

"But I do have a related question: if a house has no mortgage and the owner doesn't pay taxes, and someone else pays the taxes, does that "someone else" have a lien on the house? In other words, can someone basically force a homeowner to owe them the back taxes by paying them on their behalf? What's the law here?"

No, if I walk in to the treasurers office and pay my neighbors taxes, all I have done is given them a gift.

Now, if you mean one of the interested parties at a tax sale here is an example. I bought a lot a lot sale. There were 16 judgements against the owner (including the State & the IRS). My lawyer said I had to including them as defendants. Since they had judgements against him, then the lot was part of his assets. So, they would have the right to redeem (pay the taxes) so I could not take away the property. Of course none them did because they knew they would probably never get that back. One was very close (the builder) but he backed off.


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Not guaranteed

"Tax lien sales can be quite a good investment. Just think, where are you getting 10% return on your investments today. Your return is guaranteed, plus there is a possibility, if you want to pursue it, that you could end up owning the property."

No your return is not guaranteed. If the owner does not pay you, you have to foreclose (and never get the taxes you paid back). You have to pay the price you bid, and the owner gets the difference between your purchase price and the balance of the taxes.

I have given up on tax auctions because the prices get bid up to or over market price.

Years ago (before the auctions were crazy) I bid on what was listed as 5 acres of vacant land. After we did the title search it turned out there was nothing there. It was listed as "the remainder" of a farm that was divided up between children. They started with X amount of acres surveyed over 100 years ago, and gave X amount to one son, X amount to another, X amount to another, and there was 5 acres difference as "the remainder" The old survey was probably wrong.

The treasurer said that was not unusual, and she would love to clean them up. I could get a refund if I could get the assessment office to agree. But to do that I would have to get a survey done. The survey cost was more that what I paid for the taxes. My lawyer said just walk away which I did.


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RE: Home Investments in Tennessee via Tax Lien Certificates

"But I do have a related question: if a house has no mortgage and the owner doesn't pay taxes, and someone else pays the taxes, does that "someone else" have a lien on the house? In other words, can someone basically force a homeowner to owe them the back taxes by paying them on their behalf? What's the law here?"

No, if I walk in to the treasurers office and pay my neighbors taxes, all I have done is given them a gift.

Here's the (real) scenario I came across:
A company owned a small house, free and clear. The company went out of business, but never went through a formal bankruptcy. The company had a gazillion judgements and liens against it as a company, but not the house specifically. One of those liens was the IRS. The IRS seized the assets at the place of business and auctioned them off. They never did anything with the house. Probably didn't know it existed. It has sat in limbo. No one has done anything with the house.

BUT someone (a company with an innocuous name) paid the taxes for 2 years. Why would they do so?


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RE: Home Investments in Tennessee via Tax Lien Certificates

"Why would they do so?"

What state/city/county?

While the IRS gets the first shot before everyone, there are probably as probably nearly as many slight variations on rules as there are localities with the power to enact them.

Superior jurisdictions generally have more encompassing rules (Feds over states, states over counties or cities, etc.) unless they have waived them to the inferior jurisdiction.

The locality may have a method to gain standing by paying a tax lien to then pursue possession.
It could also be that the company paying may have purchased the company that holds title to the property.
This would make them the owner without anything appearing in the regular chain of custody of the property.

This method has been used in some places to avoid paying granotrs taxes on the tranfer of ownership of real property.

Create a company, XYZ Co., that owns the land, sell XYZ Co. and all its assets to ABC Co.
The ownership transfers with the ownership of XYZ Co. to ABC Co. but there is no change in the tile of the property requiring a new deed and grantors taxes.

XYZ still owns the land.

If a sale would cost millions in taxes for the real estate, it has just been subverted.


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RE: Home Investments in Tennessee via Tax Lien Certificates

What state/city/county?

Small town in Southern Illinois

The locality may have a method to gain standing by paying a tax lien to then pursue possession.

This is what I'm wondering. Hence my original question: can I force someone to owe me money by paying their unpaid property taxes? Does this really exist in some places? If so, how does it work/what are the rules?

It could also be that the company paying may have purchased the company that holds title to the property.

Nope, wasn't this. The company just stopped doing business and after not filing its annual report, the state dissolved it.


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RE: Home Investments in Tennessee via Tax Lien Certificates

I would not buy a tax lien where a Deed of Trust, or other liens encumber the property. That doesn't mean that one can't be recorded later. It is buyer beware and do your due diligence regarding the title. Also, Colorado is one of the few states that uses the Public Trustee Deed of Trust System for holding the deeds on a property, so different laws apply.


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RE: Home Investments in Tennessee via Tax Lien Certificates

"can I force someone to owe me money by paying their unpaid property taxes?"

Yes.

"Does this really exist in some places?"

Yes.

"If so, how does it work/what are the rules?"

Ask a real estate attorney in the area.

"Small town in Southern Illinois "

This still covers a lot of area.
You need an attorney familiar with the laws in the "small town in Southern Illinois."


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RE: Home Investments in Tennessee via Tax Lien Certificates

Oh wow, I had no idea I'd get this many responses! While I understand how many could see this as a scam, but it really isn't. Yes, you do have to be careful and check out the property and do a great deal of homework if you want a good deal.

But really, the more I talk to my investor friends, the more I hear about them making legit money or I wouldn't have mentioned it. ;)


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RE: Home Investments in Tennessee via Tax Lien Certificates

"the more I hear about them making legit money"

Have you seen their tax returns?


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RE: Home Investments in Tennessee via Tax Lien Certificates

well, these prison buddies have made a biz out of it...

http://www.tampabay.com/news/business/article1177196.ece


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