Abandon home-taxes owed are more than the property is worth

[Mike Chubb]

hello everyone this is a property that I have had on my mind for quite along time can anyone (which I don't think anyone can) tell me if there is any sort of creative idea that works with this kind of problem? What happens state wide at that point where is been boarded up and even the tax buyer for 2 of the years has walked away. there's back taxes since 2008 and abandon since 2007 

[Matt Devincenzo]

It really depends on the local guidelines for how back taxes are handled. One "play" is you can buy those existing tax certs and move to foreclose. Now even though the certificates total is $40K, they are held by an individual who can sell them for whatever amount you can both agree to. Kind of like buying a note at a discount, you could offer him say $20K. 

On paper he may be taking a loss, but maybe his total cash outlay was only $20K and the rest is fees and interest. Or maybe he's just willing to get this thing off his books and cut his losses knowing that he can't be made whole based on the value of the property. 

Either way there's a possibility of getting the numbers back to where they work for you. Obviously someone will be taking a "loss" on that amount owed, you just have to figure out how that loss can be directed to someone else and not yourself. 

Another option may be a reduced payoff to the municipality. I know for awhile a City where I buy had a code enforcement lien program where they'd accept as low as 10% or 5K, whichever was less, of the amount owed once the violation were completely fixed. I was looking at a property that owed over $300K in code enforcement liens on a $120K property. If I bought it the only way it could work was to have been able to clear those liens for less than the amount owed. 

The City knew that getting the property repaired and back in service was more important than trying to collect a debt that no one would ever pay. I've heard of similar programs for back taxes in certain areas. It may be something to look into. Maybe they don't do that, but there is at least a possibility and you won't know until you ask.