Would you purchase a lien and allow the delinquent owner to reside?

Question

I've possibly got an opportunity. Thanks to @Seth Williams strategy of mailing delinquent tax owners I got a call from a somewhat motivated seller. He owes around 7k in taxes from years past and I believe will have the home repossessed this year or next.

It hit me a little slow but I though I could buy the lien from the tax assessor at a discount and restructure the payments so he can afford them. Would you do this if he were to continue residing there? Perhaps @Joe Gore can chime in?

Seth Williams · Answer

Hi Steven J. - glad to hear you're getting results! Is this property you're looking at in Minnesota? To my knowledge - (double check me on this) I think Minnesota is a Tax Deed state, which would mean that there isn't really a "tax lien" for you to buy, only a deed (assuming the property hasn't already been seized by the county).

You could use this high balance of delinquent taxes as leverage to buy the property outright (for a very cheap price) and then sell it back to the current owner with seller financing. I know another investor who has done this a few times with pretty good results.

Steven J. · Answer

@Dion DePaoli you bring up a good point. What do I do if he is delinquent on his first position note? I don't know. And to answer your question this was simply a hypothetical idea I had floating around. Are you concerned it might be an immoral strategy - going to the auditor before the tax sale? Thought maybe I could help the guy out.

I did consider as @Seth Williams mentioned that I could buy it out right but I don't have the capital to do that. I'd need a private investor willing to do that while I could do the deal making. What's a safe number you would shoot for? As-is value minus the taxes owed - a % of risk? What's that percentage of risk?

@Steve Babiak At the very least I could make a call and find out the information from the county. Maybe they'd give interest to it, maybe not? Maybe I should check out the property, buy the lien at the tax sale, and then get the property?

Thanks again for all your help guys!

Steve Babiak · Answer

I can't imagine a tax collector selling a lien at discount before exposure to public auction, since their job is to collect the full tax bill owed plus delinquency fees. Failing to collect, by law they are then required to expose to public auction.  If you try this let us know how it goes.

Dion DePaoli · Answer

What will you do if he is also delinquent on his loan?Is this a popular strategy, trying to buy a tax lien/cert with some intent to skip over the mandated tax sale timeline and gain possession of the property?  Not sure what I think of that, if it is.

Wayne Brooks · Answer

Also, there won't be any negotiated discount for taxes due, it'll be the full amount.  You'll need to know the procedures for whatever the system is there....tax lien, certificate, deed, redemptions, foreclosure proceedings, etc.

Account Closed · Answer

If you bring the tax lien current that means the home owner owe you not the tax office, and you will need to have everything in writing before you shell out the cash. If you do that don't think you can foreclose and take the property.

Joe Gore

Would you purchase a lien and allow the delinquent owner to reside?

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