First Deal: The House with Loads of Liens

First Deal: The House with Loads of Liens

Real Estate Investor · Brookville, OH · Member since 2017 · 19 posts · 7 votes

Fresh investor here in the Dayton, Ohio area, trying to land my first deal....

I've been working any source I can to get leads on deals, and the effort is starting to pay off. I'm here to ask about one property in particular, though.

A friend told me about a vacant property across the street from their house. I checked it out. It is a dilapidated house, about 1500 sq ft, 2 beds, 1 bath. County records show that the house had past due taxes at about $3k. I found the owner through Facebook and struck up a conversation. Talk about motivated. The owner was surprised to learn that they even still owned the property. They all but begged me to make it go away.

Sounds good so far, right? Here's were it gets muddy.

The lien on those past due taxes was sold, and with the high rate of interest, that $3k balance was now closer to $18k. On top of that, the owner owes about $32k in child support, and believes there is a lien on the house for that as well. I had the owner call to confirm those balances, and he got back to me stating that the child support enforcement agency told him a buyer wouldn't have to pay up ALL of his child support to get a free and clear title, and that the tax lien company said they'd be willing to settle for a lesser amount.

Please tell me if I'm getting too involved in the deal here, but I'm having trouble letting it go. It is definitely NOT a deal at $50k, as the property needs extensive repairs and the ARV is around $70k. That said, the devil on my shoulder wants me to find out just how low these lien holders are willing to negotiate. The owner has agreed to meet me at the property next week so I can see the condition inside, but I'm expecting around $20k-$30k in repairs (those numbers may be way off as my biggest weakness right now is estimating repair costs), which, using the 70% rule, would allow me a max bid around $15k to account for closing and holding costs (forgot to mention earlier that I'm planning to either rehab or wholesale the property).

The reason I'm posting all this is that I need some help determining when to give up. Do I call the lien holders and try to negotiate lower? Will they even talk to me considering I'm not the owner? What if I get one lien holder to agree, but not the other one?

Any advice any of you can provide will be greatly appreciated. I'm not afraid to call the lien holders up and ask for what I want, and I know I'll plenty of value in the form of education from doing all this, but I don't want to waste too much of my time or the owner's.

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Real Estate Investment Attorney · Kingsville, MD · Member since 2016 · 643 posts · 408 votes
9y

@Josiah Stacy

Simply get the property under contract with a kickout clause for you: "Buyer may void the contract if liens total over $30,000." Give it to your title company or Attorney and have the liens totaled up from the title search. Pretty simple.

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  • Real Estate Investment Attorney · Kingsville, MD · Member since 2016 · 643 posts · 408 votes
    9y

    @Josiah Stacy

    Simply get the property under contract with a kickout clause for you: "Buyer may void the contract if liens total over $30,000." Give it to your title company or Attorney and have the liens totaled up from the title search. Pretty simple.

  • Christina CareyPro Member
    Real Estate Broker · Dayton, OH · Member since 2010 · 245 posts · 186 votes
    9y

    Josiah - there are actually a few options here. PM me and I can point you in the direction of the appropriate people to contact.

  • Real Estate Investor · Brookville, OH · Member since 2017 · 19 posts · 7 votes
    9y

    @Rich Baer

    Thanks that's an excellent idea I'll explore. Are there any avenues you are aware of for negotiating the liens down since they are pretty much sure to exceed my max bid? I am concerned that I would still be paying title fees to find out something I more or less already know if I put it under contract before finding out if the lienholders will come down.

  • Real Estate Investment Attorney · Kingsville, MD · Member since 2016 · 643 posts · 408 votes
    9y

    @Josiah Stacy

    You get on the phone with the creditors. You explain that the house may be lost in tax sale along with their lien. You are trying to buy it and if they will work with you at least they get something instead of nothing.

  • Real Estate Investor · Brookville, OH · Member since 2017 · 19 posts · 7 votes
    9y

    @Rich Baer

    That's all I needed to hear. Worst they can say is no, so here it goes. I'll update when I've gotten in touch with the creditors. Thanks.

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