Constable/Trustee Sales in Houston...

[Oscar Macal]

Alright guys, I've been trying to find the best way to get into Real Estate investing and have somewhat been "discouraged" from doing any type of Lease option investing in TX, so I've started trying to learn as much as possible about Constable and Trustee sales in Houston, but I have a few questions.

First, it seems they both have their pro's and con's, since generally speaking, Tax(constable) sales have the POTENTIAL to be much cheaper to acquire, but have up to a 2 year redemption period, whereas Mortgage (Trustee) sales will probably be more expensive since the mortgage company wants the most money possible for their loan, but these generally do not have a redemption period. So in essence, which, in each of your's opinion, is better? I am on limited funds ($10k) so it seems for me, Tax sales are best?

Second, since it seems to me that tax sales are best for me, is there anyway LEGAL way "around" the redemption period? I ask, because it seems in essence "pointless", to purchase it, acquire the property, but not have the right to do anything with it for 2 years, because the original owners may buy it back? I feel there has to be something that can be done, that I am not aware of... Because sure I'd get the fees and interest and what not if they pay it back, but it seems to be rather small potatoes, especially for someone like me who is trying to build cash reserves quickly to continue reinvesting.
My thought would be if I could acquire a property for only the taxes owed, for example a $100k FMV home and pay $9k in taxes to get the deed and somehow (ethically of course), waive the owners right of redemption or have them forfeit their right, I could quickly flip the property for say $60k and make a nice quick profit. Is my scenario realistic?

Any and all information is appreciated! I attended the April Foreclosure sale yesterday (April 5) to see how it all worked, and hopefully, if I can soak up enough knowledge and experience from you guys, I can attend the one in May with the intent to buy a property or 2?

Thank you!!

[Don Konipol]

There are a number of very experienced and well capitalized investors tracking all trustee and tax sales in Harris County and bidding on the potentially profitable ones. These investors are well versed in the nuances of the sales and are able to avoid the pitfalls many inexperienced investors fall into. The foreclosure sales and tax sales are ones in which the interest being sold is whatever interest the lender foreclosing has in the property - even thoroughly researching the deed records does not guarantee that you will be getting what you think you are getting.

Often times superior leins are missed, previous foreclosures were not properly recorded, missing heirs show up, insufficient notification was given, notification was not given to a party to which it was required, etc. This leads to the title on your purchase being "clouded", or even obtaining a title with leins still existing. Even the major players get trapped once in a while!

Further, the scenario of getting a $100K property for $9000 in back taxes makes good guru late night advertising, but never happens in a populated county such as Harris. The property would be bid up to a much higher percentage of value. One property I bid on was a duplex worth around $80K which was foreclosed with taxes oweing of $28K. The bidding went well above what I was willing to pay - the winning bid was $61,000.00. The overage reverted back to the property owner that was foreclosed on. Often times the bidding gets so high it doesn't make sense. The ones that attract no interest or go low do so because of problems with the property that the experienced investors are wll aware of.

And before you tell me that a tax sale wipes out all prior leins, please understand that there are scenarios where it does not. Because of the highly technical nature of these instances, I will not go into them here, but suffice to say that if the law firm handling the foreclosure does not provide notification to all the correct parties requiring notification, a lien can survive foreclosure. It is on these situatiions that the uninformed investor loses their investment.