Current Tax Lien Investors - What would make you sell?

Question

Current tax lien investors - can you weigh in on what would motivate you to sell a lien to someone else? As I've mentioned in another post, I'm looking to do this on a particular property.

They got it for 6% the all in amount to be re-paid is only $1,794.56.

What would motivate you to sell? I don't want to go too high or too low, I know this will be very individual for each person and dependent on the house and lot, but I would like some ideas to get me thinking. Thanks!

Ned Carey · Answer

@Melissa Kirchhoff the amount  I charge for the lien generally is based more on the value it has to the buyer than it does to the size of the lien.  FYI the majority of the liens we buy are at least $1K and up to about $3k typically, but we have a number $5K-10K and even higher.

I will give you a specific example. A lender on a house just contacted us for redemption figures and the amount we would ask to assign the lien. The original lien was about $5K. We figure if they redeem us and then foreclose on the mortgage they will pay about $5K in legal fees and it will take about a year. That extra year will cost them another $5K in taxes and the risk of further deterioration of the property. So we figure a $10K premium is fair. It won't cost them any more money to get the house and it will speed it up by about a year.

The house is worth $55K+ as is, and $230K after renovation.

Matthew Gould · Answer

Hi @Melissa Kirchhoff - As @Ned Carey mentioned, I would sell it for a premium and that premium would depend on how close the home was to the foreclosure process. The closer to foreclosure (2 years in NJ), the higher premium I would sell. I'm not sure about your market, but in NJ, there are two types of liens: tax and water/sewer. The type of lien would factor into the price since sewer liens start at 8% for the first $1500.

Make sure you think of all the factors. If several lien investors are eager to buy your lien, you may have made a mistake in pricing.

Jerry K. · Answer

@Melissa Kirchhoff Although I live in IL (about an hour east of Ottawa) I invest in primarily Arizona tax liens. I have been offered other investor's liens for full face value and even a slight discount if there was more than a year in the redemption period. They want to free up capital for foreclosures and other investments.

In terms of a tax lien savvy attorney, you have Emmett McCarthy, an IL real estate attorney, on one of your other threads. He has shared quite a bit of knowledge on IL tax liens over the years. You may want to reach out to him for your needs.

Melissa Kirchhoff · Answer

@Roman M., @Ned Carey - Thanks! I think both are very reasonable. I was thinking of starting at full redemption then moving from there. @Ned Carey, I wonder if your area is comparable to mine, so do you typically request about double what you paid for people you know and 2x+ for others? Or are many liens in your area more like 3-5k+?

@Stefan K. - Yes, I've been doing this for another company for a while now (and seen them invest in some *very* bad investments!) so thankfully, I've learned some things on other people's time and money. This one is actually in my neighborhood and I've done drive by and walk bys many times at different times and days - but I would only do ones I've scouted pretty extensively! Also, I'm looking now for an attorney that can help me in this, someone who can research the other liens, title and stuff that I don't know how to do. I appreciate people giving me stuff to think about, and I haven't considered the period in between buying the lien and taking it over. That could be a real disaster, especially when the people know they might be losing their house. I'm sure there's many horror stories on this!

Stefan K. · Answer

I'd just make sure you know the property and have done your due diligence.  I've seen people end up with certificates on property not worth the additional money to apply for the tax deed (FL rules) or start the foreclosure process.  I've only had 2 such certificates - one where another certificate holder applied for the deed and redeemed my certificate and another, very small lien that I'm holding out hope the same thing happens.

Issue can include land locked vacant lots, condemned or demolished houses, other government liens popping up, flood damage, fire, etc.  When these thing happen before buying the certificate, they should be found through due diligence, allowing an educated decision.  However, under FL rules, you have to wait 2 years before you can apply for the tax deed and in some counties another 1 to 2 years before the tax deed auction takes place.  That means up to 4 years between the initial certificate purchase and the tax deed auction - a lot of stuff can happen in 4 years.

Good luck!

Ned Carey · Answer

A full redemption would not be enough for me. I would want a premium. We generally charge 1-5K premium for selling a lien.  Generally 1-2K would only be for people we know.

In part it would depend on whether the foreclosure was started. If we are well along in our foreclosure case, we know the lien is more valuable to a buyer.

One thing that would motivate me, would be if I felt we  would get the property but it would not be worth what we bid or the profit margin so small as to not be worth the trouble.

Roman M. · Answer

Full redemption value is the biggest motivator to me.

We have some certificates in Maricopa County (AZ) at 16% if you looking to buy.

Current Tax Lien Investors - What would make you sell?

Most Popular Reply