Can you wholesale a tax lien property?

Question

Is it possible to wholesale a property under tax lien? If so a brief summary or even link to a good video/article would be much appreciated!

Arnie Abramson · Answer

In Texas, once it is set for auction, you could buy it from the owner before the sale, pay the taxes and then you could wholesale it.  If you buy it at the auction, in Texas, it is a foreclosure sale and you are the new owner.  You could sell it (wholesale) immediately but you cannot get a title policy for a period of time if bought at the tax sale.  That may not preclude you from wholesaling it as some buyers do not require one immediately-for example you could be owner financing it.  Ned is right on target when he says there are no absolutes in this business.  I always say that there are no short answers :).

Arnie Abramson · Answer

Skip, my apologies.  I just realized that you were talking about wholesaling and many put it under contract and hope to find a buyer.  I was replying in general about tax sales in Texas.  You are correct, you should not put it under contract and try to find a buyer for several reasons.  One of which is the buyer may not have time to close with a title company before the tax sale.  Usually it takes a while to work out the details and then you go to a title company that is potentially overloaded toward the end of the month as the realtors are trying to get theirs closed for commissions before the end of the month.  There are other considerations as well.  There are ways to work around these situations but as usual-there are no short answers for tax deed sales in Texas.

Arnie Abramson · Answer

Skip, if we buy it before the sale we get a title policy and part of the purchase price pays off the tax lien.  We do not draw up contracts and hope we can do something with it.  We purchase the property, pay off the lien and become the owner and the property is withdrawn from the tax sale.  There are several reasons for doing this such as eliminating bidding competition, securing a title policy, negotiating not only the price but the purchase terms as well-to name a few.  As you know, when I say we, I mean the investors that we help to purchase since we do not compete with our investors.  If you need more clarification, give me a call and I will be happy to go over it with you.

Jerome Brown · Answer

You can sell the tax lien, but not the property. There are tax lien auctions you can go to in order to purchase the lien. There are also secondary markets you can sell the lien on once you purchase it. If you want to purchase tax-delinquent properties, you can do so by going to your county tax collector's office and asking for a tax-delinquent property list.

This list can be used to reach out to delinquent owners and purchase their property before it hits the auction. When you purchase the property before it hits the auction you have to pay all the back taxes and liens on it before you can sell it. This method can also be done if you are wholesaling the delinquent property.

The key to doing this successfully is choosing properties two or three months prior to the auction. This leaves enough time for the title company to get things done. You can indeed wholesale a delinquent tax property, I have successfully done it many times. You just need enough space from when you buy the contract, to when the actual auction is. That's all. All facets of wholesaling have their risks - and as investors - we analyze those risks and proceed with caution after doing due diligence.

So again, you can wholesale a tax delinquent property (a property that owes back taxes and has liens on it) once you have it under contract before it hits the auction. You can't wholesale a tax lien certificate, because a tax lien does not give you ownership of a property. I hope this helps.

Randall E Collins · Answer

Thanks again Ned. In Texas one receives a sheriff's deed once purchased. With a six month redemption period. Longer if there's a homestead on it. Yes I believe this falls under a tax deed rather than a tax lien. If I'm not mistaken, the property has already been foreclosed prior to auction. In my opinion it would be too risky to try to wholesale once It's been set for auction.

Ned Carey · Answer

@Nick Villanti If I understand your question then YES.

Until a tax lien foreclosure is final the owner of a property has the right to sell the property and pay off the lien from the sale proceeds. The only issue here is,  it is possible that the foreclosure case could be finalized before the property is settled.

The way to avoid that is simply pay the taxes now. However if you put up the money, then there is a risk the owner won't sell one the taxes are paid.

Randall E Collins · Answer

Thanks Ned, yes I finally added my ugly picture. Thanks also for the vote. Some things are a definite yes or no, I was just trying to be nice about it. But Hell yea, LOL.  My moto in life is, do your best and screw the rest! No one can do or be expected to do anything else.

Ned Carey · Answer

@Randall E Collins I am not sure on what basis you say that but I believe you are absolutely wrong.

The owner of the property can sell it until a tax sale foreclosure is final. An owner has an absolute right to sell their property to avoid the consequences of a tax sale foreclosure. The owner can write a contract with whomever they chose and that includes someone who will ultimately wholesale the property.

If you want to make the argument that wholesaling is illegal, that is a totally separate argument having nothing to do with the fact it is a property in tax sale.

Ned Carey · Answer

@Randall E Collins got a picture,he gets a vote for that.

More and more I find that if it is not a hell yes that makes it a no. We can't do everything so lets only do the most important things.

Randall E Collins · Answer

Thanks Arnie for your reply and agreement. I have found in most situations there are only three answers to every question. Yes, no and heck no, I believe the latter applies to wholesaling tax deed properties.

Can you wholesale a tax lien property?

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