Resale Deed Question

[Bret Blackburn]

I have submitted a bid on a lot that was struck off at a tax delinquent auction. The attorney who represents the taxing entity and I have been in discussions regarding my proposal. Apparently, I'm not the highest bid. However, they want the property developed/built on sooner than the higher bidder is willing to complete. They are saying they will accept my bid(much lower than I could buy any kit for in the area) with conditions. The attorney mentioned they would like to put a stipulation in the deed that I need to have the build complete within 12 months after the right of redemption period(6 months) is over. We discussed delays in weather, permits, builder issues, etc. He is drafting an agreement for my attorney to look over. I ask how they could enforce it, he did mention it would take someone monitoring it and they would have to be willing to pay the court costs, etc.

I have an interest in the property for multiple reasons.

1. My bid is lower for the lot than anything I could buy in the area

2. I already own a rental within a block

3. There is major redevelopment starting in the area and property values are on the uptick

My intent for the property was to hold for a short term and resell or build a rental on the property. My issue with building is that I wanted to wait until the development was further along. I'd like to build something harmonious with the what is going on, but it's a little early in the process to see how things will look.

The resale deed states"GRANTEE hereby agrees to and this Deed is conditioned upon the construction of a habitable structure on the property described herein by the end of November 2018"

I would love to hear any feedback from the forum.  I'm meeting with my attorney today to discuss, but thought I'd ask for advice from the experts as well

[Bill Gulley]

This is a reversionary sale or conditional sale and the deed is passed from the seller to you with requirements to be met by a certain date. If the buyer fails to meet the obligation, the deed automatically reverts back, a simple filing of documents may be all that is required. It's as if the sale never took place if you default.  Your title insurance will "except out" this requirement (no coverage). This is pretty much standard operating procedure for a municipality, they want  a higher tax base. 

One year is pretty standard too, that gives plenty of time including time for contingencies in the lower 48, at least for an average size home. Now, if you plan to build 5,000+ sq ft you might ask for more time, size matters and the bigger it is the greater the tax base, so negotiate at that point.

If I were you, wanting this parcel, I'd agree and get busy, no big deal. I wouldn't be concerned as they want a house there, if you had one pretty much done and didn't have the carpet in yet, I doubt they would be pulling the  deal back lacking an occupancy permit, I'm  sure they would be reasonable. 

You can talk to your attorney, great, but talk to your banker too as this deed could have lending issues, your ability to grant encumbrances. Good luck :)