Wholesaling Tax Liens & Tax Deeds

[London Elliott]

I am in phoenix, az which is a tax lien state. 

Lien:

I've read and to my understanding you buy a lien and sit a year to see if they pay it off if not you foreclose on somebody elses home. that's the lien side I think.

Say another investor is already paying for the lien. Is their a way to make a cash offer that will cover what they owe and the lien if somebody else is already paying the lien. 

If I take the contracts to the title company are they going to tell me I cant cause somebody else owns the lien???

Do I have to contact who owns the lien and ask for permission? they probably wont want to do that.

[Jerry K.]

@London Elliott If you are new, doing what Jay suggests is a good educational start. I did that step - bought somebody elses old tax lien course back in the early 1990's. That way I learned the basic terms and process, but the biggest benefit was I didn't get on the guru's marketing list to get hounded by them for expensive coaching and investment pressure.

I do tax lien investing in Arizona, but not in Maricopa county. I do know most of the details of a tax lien foreclosure having started them in other Arizona counties. 

Maricopa is different from all the other counties in Arizona. In Maricopa more than one tax lien investor can hold a lien on a parcel. Like you describe, you can hold the 2016 lien but somebody else can hold the 2015 lien. (In the other counties, if you bought a tax lien last year and did not pay this year's taxes, then your old lien is combined with the new lien amount and sold to a new investor. You get paid for your lien and interest by the new investor and you are out)

If somebody holds an older lien, then they will reach the 3 year redemption period before you, they can foreclose. You still get paid if they foreclose successfully, but they beat you to the foreclosure and get the property.

If they do not foreclose after the 3rd year of holding their lien, and yours reaches the end of the 3rd year, then you can foreclose. If you are successful, part of your foreclosure is to pay off the other lien holders. You have 10 years to hold your lien. If it is not paid off, or if you don't foreclose, then your lien expires worthless and you lose your money.

You can always offer to buy somebody's older lien on a parcel. All will want their principal back. Some will take a discount from the interest owed them, some will ask just for the amount of interest owed, and a few will ask for a premium (more than what is earned so far) on the interest. I would not pay a premium because the odds of ever getting a property in foreclosure are very slim.

A little over a year ago I had a couple offer to buy two liens I owned. I had liens on two adjoining vacant parcels. The couple owned a house next to both lots. They had called the county to find the owners to buy the property and the county told them I owned the liens and the owners of the lots may have been deceased (they were). 

The couple offered to buy the liens so they could foreclose. I asked for the principal plus interest I was owed. The lots were worth only about $2,500 more than the taxes plus interest I was owed. I figured let them spend the $2,000 to foreclose because I was going to make almost nothing on the lots if I foreclosed and then sold them. This way I made my 16% interest for 5 years I held them and it didn't cost me a dime to get paid. I had not foreclosed yet because I was waiting for the market in that area to rebound. 

Each state is different in how liens are handled and how long of a redemption period the owner has to repay the lien before it will be foreclosed. Arizona is one of the longer redemption period states at 3 years.