All Forum Posts by: John Warren

Thanks for the IRS info, that sounds like what I've read from other people's experience, but it also seems like one of the reasons people always give for why you shouldn't buy at these auctions... just one of those myths that gets repeated I guess.

According to the state statutes it seems there's no redemption period here after it's been sold - it can be redeemed right up until the start of the auction but after that it's done.

As for the title company thing, yeah I need to find one around here to build a relationship with.  I didn't even honestly know what a title company was until sometime in the past several months when I started listening to all of the back episodes of the BP podcast.  I'd researched a fair amount of other aspects of real estate investing before, but just have never interacted with a title company in any way whatsoever, so it's a foreign idea to me that still doesn't jump to mind even when it should be the obvious solution.

I'll bet that feels cool to go and visit a property after you've bought it. 

Will definitely be posting a some clarification questions on Avvo - hadn't heard of that site until you mentioned it in a previous post.

I was looking at Ada county, because that is a neighboring county to me and was the first local county I am aware of to have an auction since I started looking into it.  The county I live in (Canyon) doesn't have any info on their site (says the next one will be in November 2016) so I'll need to contact them to get updated info, but was focusing on the auction that was taking place before shifting focus there.  Also planning to start systematically checking out auctions in other counties casting a wider and wider net as I can.

I have found at least 4-5 counties which use language similar (or identical as that looks to be pulled straight from the state statutes) to that but then say explicitly that they will be issuing a quitclaim deed to the auction winner upon receipt of payment.  So it isn't just Ada county, not sure if they all do or not.  And it is specifically tax deed properties not bank foreclosures.  Finding local foreclosures is actually something else I am interested in figuring out but haven't really looked into yet - but I'm definitely not seeing them in the same place.

I was really considering buying a parcel at this auction purely for the experience, but by the time they removed the ones that had been redeemed before auction day there were only I think 3 that were big enough to legally build on (and not even usable if rezoned somehow, just like 4 ft wide strips of land between 2 houses and such).

1 of those was commercial, would have required tons of tree clearing and excavating to build on it an all the engineers, applications, and hearings involved with that were intimidating for me... that was the only useful one I could've afforded.  It went for $2.2k plus a connected plot for $1k

1 was 40 acres in the foothills with a steep grade.  Can't be rezoned because of that, can't be subdivided, and again more engineering and issues with no utilities out there and such I wasn't sure about... was still interested but it went for ~$32k.  INCREDIBLE view and if the buyer can figure out how to overcome the crappy road, get an easement to the property, bring out utilities (or solar???), and get plans approved they will have an incredible asset worth way more than $32k at least in the current market.

And the only one that I think could have been built on without much hassle was a 4.5 acre plot partially in a flood plain, but in a very high demand area with some pretty nice views and right on the edge of town.   I was super excited when it was only at like $16k a few hours before the auction ended, but by 7am it sold for just shy of $100k - piece of land with similar qualities sold for more than 3 times that earlier this month, so still don't think the winner got a bad deal I just don't have that budget.

I couldn't bring myself to pay several hundred for a piece of land I couldn't even legally build anything on.

I have a feeling other counties farther from Boise and perhaps without the online auctions may have better deals.

Still, it was a really good learning experience.

https://legislature.idaho.gov/statutesrules/idstat...

In section 3 of that page it says:

Any property sold may be carried on a recorded contract with the county for a term not to exceed ten (10) years and at an interest rate not to exceed the rate of interest specified in section 28-22-104(1), Idaho Code. The board of county commissioners shall have the authority to cancel any contract if the purchaser fails to comply with any of the terms of the contract and the county shall retain all payments made on the contract. The title to all property sold on contract shall be retained in the name of the county until full payment has been made by the purchaser. However, the purchaser shall be responsible for payment of all property taxes during the period of the contract.

That sounds to me, when I read it, that it is saying I have the option of telling them I would like to pay it off over the next 10 years (or less) at their standard interest rate.  But surely that can't be what it is saying?

Is it saying the county board of commissioners has the option of offering to carry it under that contract?  That sounds more likely, but it also seems like the laws tend to say explicitly things like, "The board of commissioners may, at their discretion (or "as the county deems necessary" or "when in the county’s best interest") carry the property sold on a recorded contract....."

It seems odd that it isn't explicit like it is other places, but it also seems odd that it would just leave it up to me to decide if I'm eligible for a hard money loan from the county.  I guess they would get to collect interest until I pay it off or they get the property back plus the interest if I don't but still...

Also, the Ada county auction listings seem to indicate payment due by end of business Thursday (so 4 business days after auction ends basically).

And I found this document from Bannock county indicating they expect payment on the day of the auction. https://www.bannockcounty.us/wp-content/uploads/ta...

I haven't been able to find much info on idaho statute 31-808(3) actually being used, so I guess for now I'll assume it's rule saying counties can do it if they want but none of them seem to be doing it.  Something about the wording threw me off though.

Originally posted by @Elvis Vasquez:

I thought maybe I figured out what that's about.  The statutes outlining the tax deed process talk about how it wipes out prior liens (with exceptions like IRS, etc) and the state transfers it's claim to the property "excluding easements, highways, and rights-of-way owned by the county, unless expressly conveyed".  (See the section numbered 4 in the Idaho statute linked above)

If the county gave up all of their rights to the land, that would presumably include the easements and such, so maybe the QCD makes that delineation easier somehow?  That doesn't really explain why it's different than other states that do Tax Deeds though... 

And in that same document from Bannock County, it says: Bannock County issues a Quit Claim Deed upon the sale of property taken through tax deed. (See Idaho Code 63-1005 – One-year possession under tax deed conclusive as to regularity of proceedings.)

That makes it sound like you have to hold on to the QCD for a year to clear up any potential issues with it, but I haven't seen an indication of that anywhere else - including Idaho Code 63-1005 mentioned there.

Wow, that's an incredibly generous offer!  Thank you.  I have some health issues flaring up this week that make me unable to reliably sit and focus so I would be afraid to waste your time right now (I started writing this message yesterday for example and suddenly had to go lay down before I could finish).

I would love to take you up on that though once my health stuff hopefully settles down again.

The quote about the quitclaim deed was a website where the county lists the properties for sale, not actually on the Ada county website (I don't think I ever saw the word "quitclaim" on the Ada County site) - but I did find on the Canyon County (right next door to Ada county, I actually live in Canyon):

So it seems for some reason that the counties here are recording tax deeds when they foreclose, but if you buy that property at auction they give you a quitclaim deed rather than the tax deed.

The auction I've been looking at actually takes place this weekend, which I realize doesn't make this a great time for me to be trying to learn, but at the very least I'll get to see what the different properties go for and get a slightly better idea of what to expect in the future.

I would be very interested to see what you find out if you have time to review Idaho's laws and processes.  

On a sort of related note, while I was trying to look up more property info, I stumbled into a property which seems to have had a tax deed issued at the same time as all the other ones being auctioned, has not been redeemed, and yet is not included in the auction.  The Ada county website says the "properties taken in tax deed are auctioned off within 90 days." So I am curious what is going on there - to be honest, it's a pretty valuable property, so I'm curious how it even got to the point where the tax deed was issued...

https://adacounty.id.gov/Treasurer/Tax-Deed/Unders...

I wonder if either after the auction is over or maybe after a couple weeks when all the auction sales have been finalized if I could just go in to the treasurer's office or county clerk or whatever and ask for a list of all the tax-deed properties that haven't sold at auction and see if it's on there (and I'm curious what's on there from previous years anyway).  Would be interesting if it slipped through the cracks somehow and I was able to make an offer on it... assuming everything else is in order of course.

Actually right after I typed that I found a line that says "For tax deeded property, the board of county commissioners shall conduct an auction no later than fourteen (14) months from the issuance of the tax deed."

https://adacounty.id.gov/Treasurer/Tax-Deed#322113...

So I guess they technically have until next year at the latest to auction it, but even then, 14 months seems like it would have to be earlier than the typical annual auction on the last weekend of June...

Thanks!  And yeah, that's one variable I don't feel like I have the info to predict - and won't until I've watched how this auction plays out (and probably more after that to get a better understanding).   The market is hot right now around here with people flooding in from California so I'm sure there will be bigger money out there, but it will be interesting to see what that money goes after and where the line is for something not being valuable enough to them for the effort of tax deed auction.  Regardless, I figure I can put my deposit in and set a limit in advance for what I think the properties are worth.  If bigger investors pay more money, I simply lost the $35 "processing fee" on my deposit and the due diligence will have been good practice - relatively cheap education.

I don't honestly think I have a snowball's chance of getting a property that a bank, who hasn't already redeemed it, is going to think is worth their time to pursue me after it's finalized - but I'd be lying if I said that didn't spook me a bit.  

That bankruptcy thing is interesting... I wonder if that would hold true for properties that aren't the primary residence (which I believe has more protection during bankruptcy?). I don't think that applies here based on the records I have found so far, but I'll definitely keep that in mind as one of those weird edge cases to try to understand better if I end up getting deeper into this process.

Maybe calling the IRS will be a bit more enjoyable when it's to talk about someone else's taxes?  I don't know if this is true for other counties (and I'm sure it varies even more in other states) but at least in Ada County ID it looks like the Tax Deeds are all recorded for the county in March.  So best case scenario, any existing IRS lien should be clear 120 days after that - and worst case they would be cleared 120 days after the last weekend in June (Ada County auction) - or I guess 10 days after that since that is when you're supposed to actually get the tax deed (I think I saw that was the timeline in ID).

That is my understanding here too... seems to make the process much less scary than I've heard it being discussed so I think that's what's making me second guess myself on a number of things.

That makes more sense to me, the thing that is causing me to second guess myself is the terms of sale I am looking at online for the auction: 

QUITCLAIM DEEDS • A Quitclaim Deed will be issued and recorded by the Ada County Treasurer. • The Quitclaim Deed will convey only such title as is vested in the County of Ada under the tax deed process according to Idaho law.

A tax deed seems like it would be more ideal than a quitclaim deed, but maybe that's just their way of saying, "If someone sent a notification letter to the wrong address and we missed, you get to deal with it now, not us."  

 I found an online system where I can look up county clerk records tied to a person's name - it doesn't actually show the document but gives enough info to draw some inferences and I *think* if I go to the county clerk office I can request to see them by the document numbers I found online.  So maybe I see the tax deed recording in there, and I see something labeled "MISC INFO AFFIDAVITS ETC".  I don't see any IRS liens recorded there for the properties I've looked at so that's a good sign... sounds like a visit to the county clerk is in order though.

Thanks for the help!   

I still have no idea what to expect as far as bidding goes, but I am feeling more and more confident in my ability to assess the value of a property for me and my business plans - we'll see how that lines up with how other bidders valued it. 

I've been spending many hours Googling, but since often even if I search for Idaho specific stuff other states come up more regularly in the results. And even when I have found answers that I'm somewhat confident in, I don't want to risk money based on whether or not I found the right website on Google or whether I interpreted the relevant Idaho legislation correctly.

My understanding of the Idaho law I linked to is that there isn't a redemption period after the sale takes place.

I'm quite new to this, so I don't have a title company that I use regularly, but that is definitely a valid point as I'm sure they have insight into the process and be able to help clarify it.  Maybe it's time to find a title company...

I am intrigued by your idea of buying directly from the owner... I've heard people talk about doing that, but assumed it had to take place before the property was foreclosed.  Since they still have the right of redemption prior to the auction though, it makes sense that could be worked out somehow though.

Since they have to give the money to the county before they have the right to sell it to you and you ideally don't want to give them the money until they have the right to sell it to you, does that complicate the closing process or is it not that big of a problem?

What happens with the mortgage in that case, if there is one (maybe you only do that process if there isn't one?)?  My understanding was the mortgage disappeared when the deed was transferred to the county, but I hadn't thought about what happens if the owner then comes and redeems it before sale... is the mortgage still wiped out and they get to keep their property?

I have had my eye on some upcoming tax auction properties, mostly to watch and learn from the process, but if they go for the right price I may try to bid.

Anyway, I am trying to do my due diligence stuff ahead of time both for practice and so I feel comfortable bidding up to a pre-determined limit... but I want to make sure I'm understanding everything right.

1) Tax DEEDS - I've been searching a lot on these forums and it seems like there's more about liens than deeds, but in Idaho, it seems they do tax deed auctions.  My understanding is that these properties have already been foreclosed on with proper notices given and the deeds officially transferred to the county a few months ago.

2) Redemption - My understanding based on the state laws the original owner could walk in tomorrow, hand them a pile of cash and get their deed back.  But that right disappears entirely after the property is sold (or after 14 months if the county doesn't sell it and it hasn't been paid off).  I was wondering if anyone more experienced could confirm my understanding of the legalese:

"After the issuance of a tax deed, real property may be redeemed only by the record owner or owners, or party in interest, up to the time the county commissioners have entered into a contract of sale or the property has been transferred by county deed." 

https://legislature.idaho.gov/statutesrules/idstat...

3) I.R.S. liens - I haven't figured out how to look these up yet, but it is my understanding that IF there is an IRS lien on the property, it would be valid for 120 days.

3a) Does that 120 days start when it is purchased at auction or did it already start a few months ago when the county foreclosure process went through and the deed was transferred to the county (presumably from when the deed was recorded then?)?

3b) If the I purchase a property with an active IRS lien and they pursue it, what happens?  Do I owe the IRS now?  Do they redeem it from me? Redeemed for what I paid or how is that calculated?

3c) Is there an easy way to search for whether or not a property has an IRS lien on it?

4) Potential related mortgage - One property is a piece of land.  There is a nearby house on a different plot which I believe is owned by the same people.  That house appears to be undergoing foreclosure from the bank.  I'm thinking odds are this plot of land was probably included in the same mortgage...

My understanding is that tax deeds once they have been fully through the tax foreclosure process (which this one has been since the deed is listed as owned by the county, right?), wipe out the claim that the bank had under a mortgage with the previous owner.  Is that accurate?

Is there anything weird that could be caused by this parcel being mortgaged together with a separately taxed parcel with the house on it?

My assumption would be that the bank would still follow through on the foreclosure with the house itself but whoever buys the parcel of land at auction would have it without having to worry about the bank.  Is that accurate?  Even if it is, is there any chance the bank would try to fight me on it?

5) Quit claims and quiet titles - So... even though the tax deeds wipe out most other potential claims to the land, they're still just giving out quit claim deeds.  I understand this wouldn't protect against IRS liens, but is there anything else I would need to look out for?  

If there's no redemption period for the prior owner and other encumbrances (mortgages, HOA, etc) have been wiped out, and potential IRS liens fall away at 120 days (whether from auction or initial foreclosure), it seems like it would be pretty straight forward to find out if there are any problems unless I'm missing something else that isn't wiped out. Should be as simple as finding out if there is an IRS lien or not - if the isn't the title should be clear and if there is it will be in at most 6 months if the IRS doesn't pursue the lien, right? People talk about tax deeds as a really scary thing, so I feel like I have to be missing something.

Either way, it sounds like the quiet claim process is going to be necessary if I want to sell the property in the future (but maybe doesn't matter if I don't want to sell it?).

If there is an IRS lien and I decide to try to purchase a property anyway, is it better to wait until the IRS's redemption period expires before trying to do the quiet title process, or is it better to do that first?

6) If I understand right, much of the wiping out of other potential claims depends on the county having issued the proper notices to the proper people at the proper places and proper times... is there any way to verify when/how/to whom that was done? Or do I just have to cross my fingers and hope they did it right?  (maybe that's the scary part of tax deed auctions?)

Is there any chance they didn't notify the bank because the bank mortgage was primarily for the parcel of land with the house but they would still have some right to come after the parcel that is at auction?  Or maybe they got the notice and that made them decide to foreclose the house (bank foreclosure started close enough to the tax foreclosure that it seems unlikely to be a coincidence)?

I know that was a ton of questions, but I appreciate any help you could offer either in answering or pointing me in the right direction.  Trying to wrap my head around all of this and it is a lot to absorb!

According to the city property maps, the plot is zoned to allow either single family or multi-family residences without special allowances needed. (Would definitely be talking directly to someone in the zoning office before moving walls or adding a kitchen or anything though)

To make sure I understand right, you're saying to get the utilities split it would have to have a certificate of occupancy - and thus would have to pass inspection. So it would have to be done with the bulk of the rehab before getting split metering... Once you've got the stamp of approval from the city, is there any reason the utilities would have a problem from there, or is it typically just a matter of paying whatever crazy fee they require for the work?

Originally posted by @Dennis M.:

Purely regarding the cost paid to the utilities for the meter hookups and any extra lines or whatever that may be needed?

Originally posted by @Nick C.:

It's not a local, if things work out I would be traveling to probably do a temporary live-in flip. But based on the city records, the plot is zoned to allow it already (obviously would triple check that with someone in the zoning office before converting anything), the zoning regulations explicitly specify that plots with that zoning can do multi-family without any special allowances (I believe "of right" was the phrase used).

If it is already zoned to allow either, is it still possible for the city to say, "Hey, I know we said you didn't have to ask for special permission to do multi-family here, but we really would rather you keep it as a single unit."?

Originally posted by @Wayne Brooks:

Oooh hadn't thought about multi-unit having different set back requirements.  I did actually check on the parking regulations, and between the existing parking, available street parking, and proximity to public transit it is way beyond requirements there.

The set back thing I'll definitely need to check on.  I suspect it will be fine, but the roads were widened there a couple years ago so it definitely needs to be checked.

As you said, I'll definitely want to sit down face to face with someone before doing anything to convert it to a duplex. The deal should be profitable either way I think if everything else comes together.  It's just a matter of trying to figure out which route would be more profitable (and how much more/whether it's worth the extra effort).  

---

Thanks for the input everyone!

Even if my offer isn't accepted or things don't work out for other reasons it's been a good exercise, as a newbie, trying to assess the costs and potential returns of the two different options.

There is a property I am eyeballing that would require a fairly extensive remodel, but it is also big enough and laid out in a way that made me think it might be a good idea to convert it to a duplex. It might be able to be done without even losing a bedroom, but even if it goes from 4 bed 2 bath to a unit with 2/1 and a 1/1 unit, the rental income (or sale price) should be higher than a 4/2 SFR in the area.

That said I'm not sure if there's something I may be overlooking.

It already has 2 exterior doors positioned nicely with separate porches and room to have cars parked on different sides of the house (it's on a street corner).

I looked up the zoning regs for how the plot is classified and it is allowed by right (don't need to apply special allowances or rezoning) to have multi-family housing on the plot.

The rehab would already have it gutted enough that the changes to plumbing and electrical would be easier.

I don't have any idea how hard it is to get separate metering for water/gas/electric.  Is that normally very difficult?  Expensive?

Since I don't want to pay for tenant utilities, they would need separate HVAC and hot water in addition to the metering.

The second kitchen and related plumbing/electrical work would definitely be an added expense - laundry hookups too for that matter... but if the numbers add up that shouldn't be a problem.

Is there anything else I'm missing or could be overlooking that would throw my numbers off significantly?

Does anyone have experience with converting to a multi family property during rehab of a single family?  Any issues you ran into or things you wish you'd known going in?

Rather than stripping the screw head, you could probably do that on a part of the hinge that is only accessible if the door is already open.