All Forum Posts by: Denise Evans

Not C or lower. I just saw a foreclosure deed recorded a few days ago for a house appraised at $1.2M and the credit bid price was slightly north of $800,000. In Tuscaloosa, Alabama, that is a two-income professionals (doctor and lawyer) house or business owner.  Many people are foreclosed upon and can afford significant rent, but the loan was accelerated and they could not refinance.  Or, their COVID forbearance expired and the missed payments were capitalized and now they cannot afford the larger payments. Or their many reasons. Each situation must be evaluated on it own. Personally, I prefer to identify pre-foreclosure properties and negotiate short sales.  During the last crash I typically obtained short sale approval at 20% to 25% less than true then-market value. Plus the owner doesn't care if you have earnest money or not. Plus they will spill their guts about everything wrong, and you can use that info to drive down the lender's appraisal.  Plus the process generally takes 60 to 90 days, so plenty of time to round up investors if you need them. Plus no competition, such as you encounter at a foreclosure auction.

 I do not understand the advice from Cloud Willis that only the original owner can buy back their property. There is a list of parties entitled to redeem, including spouse, guarantor, lienholders, etc.  In addition, an Alabama Supreme Court case ruled that the statutory right of redemption is a personal right, not a real estate interest, and is transferred via an assignment, not a quitclaim deed.

One cannot sell redemption rights before the foreclosure because they do not come into existence until after the foreclosure.

You cannot back date a bankruptcy. Before the 2005 amendments to the bankruptcy code, a bankruptcy filing would allow a borrower to reverse a foreclosure that had already occurred, but that is no longer possible.

Foreclosure investing is very profitable and relatively safe in Alabama. You just need to  know what you are doing.

There are no preferred forms for the notice to vacate. I suggest posting it on the door and mailing by certified and regular mail. The time starts from receipt, so send as many ways as possible.  Something like, "I purchased your property at the foreclosure auction on ______, 2022. This is your notice to vacate the premises within ten calendar days. Failure to vacate in a timely manner will result in loss of any redemption rights and subject you to a lawsuit and a request for damages for unlawful possession."  Put your contact information at the bottom so if they want to redeem they can contact you. mostly, you don't want them LATER saying they would have contacted you to redeem but didn't know how to get hold of you.

You can buy them out rather than using courts. The going rate is $2,000 cash for keys if they vacate in three weeks, but they also have to release any redemption rights to you.

If there are no problems (e.g., a claim the foreclosure process was invalid for some reason) then an ejectment lawsuit will cost around $500 for the lawyer and $200 for the court filing fee and $50 for a default judgment. That will take 30 calendar days from when you obtain service. I recommend a private process server for the speed and the ability to instruct the process server to video themselves serving the papers. That way, the defendant cannot later claim they were not served and possibly get a default judgment set aside. Private process server will cost around $75.  if they file a generic answer and force you to prove your right to an ejectment order, your lawyer can file a motion for summary judgment. That usually costs a couple of hundred dollars extra. You can nail this stuff down when interviewing lawyers. The motion for summary judgment tells the court "There are no fact issues in dispute, maybe only questions of law. Because of that, there is no need for a trial so a trier of fact (judge or jury) can decide the correct facts.  So, here are the facts, they are undisputed, now please rule as a matter of law that we win." That usually takes about three to four weeks. Then the ejectment order has to be final and non-appealable, which takes 42 days. Assuming there is no appeal and no post-judgment motions, you can then get your turnout order. That takes a couple of days. In most counties, you can them make an appointment with the sheriff's department for a deputy to accompany you and keep the piece while your movers put everything out on the street and the owners are escorted out.  If they resist, then you go back to court and ask for them to be found in contempt of court. that takes about a week.  If you are in Jefferson County, then the turnout orders have a backlog of several months because of there being too many ejectments and evictions to administer, and not enough sheriff's deputies. All other counties it is pretty fast.

For the above reasons, it usually makes sense to negotiate cash for keys.

By the way, it is not usually the borrower you have to worry about redeeming. It is the borrower selling its redemption rights to another investor, who the redeems and snatches your deal away from you.

If there is a redemption, you are entitled to repayment of the auction bid price (not the price you paid the bank, if you bought it from them after the auction) plus casualty insurance premiums, plus the value of any permanent improvements or repairs made after the auction, all at 7.5% interest.

If you have to eject, you are also entitled to damages equal to the fair rental value of the property from date of demand until delivery of possession, but borrowers are usually judgment-proof, so don't pin a lot of hopes on that being collectible.

There are some risks associated with an occupied Alabama foreclosure property. You should give the 10-day notice to vacate immediately. If the borrower does not vacate in a timely manner, they lose their redemption rights. 

If you want to get them out using the courts, you file an ejectment lawsuit in circuit court. it can be timely and expensive, but most times you are able to get a summary judgment. 

Sometimes borrowers have grievances against their lender and wish to sue. Their lawyers tell them to wait until an ejectment lawsuit is filed in state court. that way they can add the lender as a party and keep the dispute in state courts, which are procedurally much more forgiving and friendly than federal court. if the borrower just sued the lender in a stand-alone lawsuit, the lender would remove them to federal court. Federal judges are very strict about rules of procedure and rules of evidence and deadlines and stuff like that. Most lawyers are uncomfortable practicing in federal court.

Lender liability law in Alabama is rather swift justice against the borrower, and most lawyers know that. It is rare for somebody to be able to successfully cause trouble. I'm just warning you that is a possibility, but a low-risk possibility.

Way too complicated for my poor fingers to type an answer. Please feel free to contact me.

I agree with you. But, if you think about it, if the former owner sold its rights in the property to someone else, such as via quitclaim deed, it sold ALL of them. That would include the excess funds. The Alabama Supreme Court decision fundamentally rests on the analysis that the money is part of the property rights.  I have a harder time justifying the owner of the tax deed being able to claim those funds, but it is entirely consistent with that earlier court decision.

The Alabama Supreme Court ruled on June 24, 2022 that the retroactive portion of a tax sale statute was illegal. The statute stripped former owners (and the investors who partnered with them, by implication) of their rights to claim the excess funds in a tax sale. The scenario is an auction for unpaid taxes of $1,000 as an example. The bidding reaches $20,000. Who is entitled to the excess $19,000?  Earlier Supreme Court decisions said the owner could claim that money. Unhappy special interests got legislation passed that said "only if the owner redeems" and the law was specified as retroactive.

I am paraphrasing, but the recent decision said, "You cannot just pass a law and make it retroactive and deprive people of their property rights with a wave of your magic wand!"

So, for tax auctions before the 2014 amendment, excess funds strategies are back on again because the retroactive part of the statute has been struck down.

What about AFTER the statute was passed, so "retroactive" is not an issue?  Good question. It is exactly the same reasoning, you cannot just take people's property rights away.  If my house sold for $20,000 for unpaid taxes of $1,000, then my house had AT LEAST $19,000 worth of value that the counties want to keep unless I redeem. What if my house isn't worth redeeming? I'm entitled to at least my $19,000, right?

Another case is bubbling up in the appeals process that will probably say the same reasoning as in the June 24 case applies to tax auctions after 2014, too.

WHO exactly is the owner entitled to the money. Formerly it was thought "owner" meant the person who did not pay their taxes.  Another Supreme Court decision from several years ago said it is the owner at the time of the claim for the money. Which might be different from the owner at the time of the tax auction.

What does that mean to you? Start researching the excess funds treasure troves again in Alabama, update your joint venture agreements, and sign up CURRENT owners so you can claim that money and split it according to however you negotiate the split.  Happy days will soon be here again, and you should be ready.

Often, the current owner is the tax deed holder. Think about that, and what it means if you have tax deeds!  You can get some of your own money back.

To clarify, just for general "walking around " knowledge, the Uniform Laws Commissioners wrote the Uniform Residential Landlord Tenant Law, and their committee comments.  Other types of laws are created in a very similar manner. Uniform Condominium Act, Uniform Gifts to Minors Act, Uniform Commercial Code, Uniform Anatomical Gifts Act, etc etc etc. States then take down a copy of the "source document" basically, the one written by the Commissioners, and add their own tweaks. In the case of Uniform Laws, states very rarely copy from each other.  One would assume that would be a logical course of conduct--find out the experiences of other states with the Uniform Laws and their own fine-tuning, learn from mistakes, learn from things that turned out well, and incorporate everything into a state's newly enacted residential landlord tenant act. But, that always seems to be too much work, and virtually never gets done.

Yes, Bullock did the new tax lien sale procedure. You have no rights except for interest to accrue, until you are able to foreclose in three years. There are some strategies you can use that will allow you to bootstrap your lien into other rights, but you don't have them automatically.

It depends on whether it was technically a lien auction under the new rules, or a tax certificate under the old rules, but people frequently call them tax liens.  What county, and what year was the auction?