All Forum Posts by: Denise Evans

Yes, this is called a "deed in lieu (that's French for "instead") of foreclosure" in Alabama.  People just shorten this and call it a "deed in lieu" or a "DIL."  In some states, a DIL is the same as a foreclosure. In other words, if there is a second mortgage on the property, and/or a tax lien, and/or a judgment lien, they are all wiped out by the DIL, the same as if there had been a foreclosure.  This is NOT true in Alabama.  A DIL in Alabama allows all junior liens to remain on the property.  Be sure to get a title commitment before going forward, and then also pay for title insurance and make sure the title insurance covers "the gap."  Here's the problem Even if there are no junior liens at 3:30 on Friday afternoon, but one gets recorded at 4:40 and closing takes place at 4:50 and the deed recorded the same day, the junior lien got recorded before the deed. Technically, it would remain on the property. This rarely happens. Most insurance companies insure "the gap" so even if this happens, the title insurance would take care of the problem. Some do not insure the gap. That's why you need to ask.

A DIL shows up as a foreclosure on the borrower's credit report. A borrower might prefer to just deed the property to the lender and simultaneously have the note marked "paid in full" and a mortgage satisfaction recorded in the real estate records. This is a matter for negotiation between the parties. An FDIC-insured bank is not allowed to do this because of issues related to accounting and transparency. A private lender can.

@Toi H., there are all types of properties on the state list. You've just been unfortunate if all you've encountered was unimproved land.

Hi Toi, What list are you using? The county's list of properties set for auction (that list will come out in the spring) or the State's inventory of properties offered at previous tax auctions but not purchased by anyone (in which case, they go to the state) or some 3rd party list?

If you purchase the note AND the mortgage from the original seller/lender, you have the right to redeem from the tax sale and the right to foreclose. Your foreclosure will not pass good title until you redeem from the tax sale.  If another investor buys the tax lien from the state, that investor can make "preservation improvements" and your redemption price will include the VALUE of those preservation improvements (not just the cost to make them.) That amount can rack up to a large number pretty quickly. If you plan to act, I'd probably do something sooner rather than later.

Contact Jonathan Keith in Mobile. He works with a lot of foreclosure investors and is VERY knowledgeable about spotting those unusual deals that are overlooked by less sophisticated buyers. He operates in Mobile and Baldwin counties. Contact me via private message, and I'll send you his email address and phone number. I can also give you some Baldwin County contacts for short sale opportunities. Short sale properties can typically be purchased for 20% less than FMV.

You can take possession as soon as you get your tax certificate, but you can't just throw someone's stuff out into the street. If the property is vacant, then take possession. If it is occupied, you must give written notice to vacate and then must wait 6 months before filing an ejectment lawsuit.

It is critically important to take possession as quickly as possible, because this is the event that starts the judicial redemption clock ticking down. There are several redemption time periods in Alabama. It is tricky to figure out yourself, but fairly easy to explain. Contact me privately for more information.

If you have a tax deed (available 3 years after the tax sale) then you do not have to give the written notice and wait 6 months. You can file for ejectment immediately.

Often, once the investor indicates that it plans to take possession of the property, the owner will begin redemption. Be aware that even if you have a tax deed, the owner can still redeem.

If you file an ejectment lawsuit and the owner counterclaims for redemption, your legal fees will be added to the redemption cost the owner will have to pay.

If the owner files a lawsuit against you to force redemption, and then you counterclaim for ejectment, you are NOT entitled to recover your legal fees.  The owner does not get legal fees, either, though.  Why would you counterclaim for ejectment? Your counterclaim would say, basically, "We don't think the owner will be able to redeem. Judge, we want you to decide the redemption price tag, and then give the owner a short period of time to cough up the money and, if he doesn't, we want you to order him off the property so we can go ahead and take possession."

Because of the legal fee rules, it is tactically important that you be the first one to file a lawsuit.

It is a good idea to get liability insurance whether you have a tax deed or tax certificate. Premium will be around $50 per year.  Not all insurance companies will write casualty insurance on a tax certificate.  Since you have possession rights but not ownership, your insurable interest is limited.

If you do purchase casualty insurance, and the property contains a residential structure, then if the owner redeems, they will have to reimbursed you for the premiums, plus 12% interest.  Remember, the property MUST contain a residential structure in order for you to be compensated for the premiums.

Good luck!

@Account Closed, check out my latest blog post, about redemption and mandatory arbitration.

I'll blog about this on BP. The bill passed.  I have a blog on my website about mandatory arbitration when there is a redemption request. I'll also blog about that on BP. You can message me if you need the info earlier.

It varies depending on the community. Here is the link to the millage rates for different cities in Lauderdale County, and the county at large: 

http://lauderdalecountyonline.com/New_Website/Revenue_Commissioner/Advalorem_Taxes/index.html

You start with the tax appraised value.  Multiply by 10% if the property is owner occupied residential, to reach the assessed value. If it is rental property or commercial, you multiply the tax appraised value by 20% to reach the assessed value. Then multiply the assessed value by the millage rate to obtain the gross taxes. Then you apply the exemptions (such as homestead, which is a whopping $47 credit) to reach the taxes due.  You can see prior years' taxes, and the tax appraised values, on the county's GIS website at

http://isv.kcsgis.com/al.lauderdale/#/Home and the online property tax records, at

http://www.lauderdalecountyonline.com/New_Website/Revenue_Commissioner/Online_Tax_Records/index.html

This is the statute about determining the value of permanent improvements:

(a) Any person offering to redeem must pay to the then holder of the legal title the value of all permanent improvements made on the land since the sale, and if the holder of the legal title cannot be ascertained, payment may be made to the circuit court of the county having jurisdiction of the subject matter when the complaint is filed to redeem. In response to written demand made under Section 6-5-252, the then holder of the legal title shall, within 10 days from the receipt of such demand, furnish the proposed redemptioner with the amount claimed as the value of such permanent improvements; and within 10 days after receipt of such response, the proposed redemptioner either shall accept the value so stated by the then holder of the legal title or, disagreeing therewith, shall appoint a referee to ascertain the value of such permanent improvements and in writing notify the then holder of the legal title of his or her disagreement and of the fact and name of the referee appointed by him or her. Within 10 days after the receipt of such notice, the then holder of the legal title shall appoint a referee to ascertain the value of the permanent improvements and advise the proposed redemptioner of the name of the appointee. The two referees shall, within 10 days after the then holder of the legal title has appointed his or her referee, meet and confer upon the award to be made by them. If they cannot agree, the referees shall at once appoint an umpire, and the award by a majority of such body shall be made within 10 days after the appointment of the umpire and shall be final between the parties.

(b) If a person offering to redeem fails or refuses to nominate a referee as provided in subsection (a) of this section, he or she must pay the value put upon the improvements by the then holder of the legal title. If the then holder of the legal title fails or refuses to appoint a referee, as provided in subsection (a) of this section, the then holder of the legal title shall forfeit his or her claim to compensation for such improvements. The failure of the referees, or either of them, to act or to appoint an umpire shall not operate to impair or to forfeit the right of either the proposed redemptioner or of the then holder of the legal title in the premises; and, in the event of failure without fault of the parties to effect an award, the appropriate court shall proceed to ascertain the true value of such permanent improvements and enforce the redemption accordingly.