Tax lien sale, property under contract - Posted by Shaun (NJ)

Posted by Shaun (NJ) on August 14, 2003 at 20:34:53:


Tax lien sale, property under contract - Posted by Shaun (NJ)

Posted by Shaun (NJ) on August 12, 2003 at 08:21:18:

I have a contract for a four family for 72,500. The owners owe 105,000 and will not close on it. There is also a $5,000 tax lien outstanding. Another tax sale is coming up this month and a $5,400 tax lien is being sold. My question is should I buy this tax lien certificate to protect my interest in the property. I am sure the certificate will be sold at close to zero percent to the same investor, they are local investors. The property is worth about 160,000 as is in todays market. I have had the contract on the property for almost two years now and I can not get them to close.

Any suggestions on how to force the sellers to close will be appreciated.

Re: Tax lien sale, property under contract - Posted by Ben (NJ)

Posted by Ben (NJ) on August 12, 2003 at 09:49:39:

Firstly, buying the tax lien will not really protect anything. The lien holder can always foreclose on the earlier lien so a subsequent lien purchase won’t stop that foreclosure. More importantly, why have you not yet sued for specific performance on your contract? This should have been done immediately and it’s been two years already? A judge may find that you have already waived your rights to enforce this contract. Your best bet would be to buy the oldest tax lien and foreclose on the property yourself. Of course that lienholder may want a substantial premium to assign his lien to you.

Re: Tax lien sale, property under contract - Posted by Shaun (NJ)

Posted by Shaun (NJ) on August 13, 2003 at 08:27:38:

Thanks for the info. I have asked my attorney several times if I can force the owner to sell (almost monthly since I obtained the contract). He told me that since their is a mortgage on the property for $105,000 when it went in front of a judge and they said they could not pay off the mortgage the judge would side with them. If they do not have the money to pay off a mortgage how can they close? It is a realestate company that holds a couple of million dollars in real estate but I guess they can still claim that they do not have the money to bring to closing. My attorney told me the only way to protect myself is to have a notice of settlement filed every 45 days which he has done. This way they can not sell to anyone else and if they do then I can sue for damages.

As for the tax sale. It was my understatnding that their is an inverse priority in tax liens. So if I buy the tax lien at this sale I would get paid off no matter what. The owner of the tax lien that is already out their will probably not foreclose on the tax lien because it will go to sheriff sale and their tax lien will be paid off after the auction they will not have enough equity in the property to make it worth while to buy at the sale. If I own a tax lien in a higher position then the current lien holder it might give me a better negotiating possition to buy the older lien.

One flaw in your thinking… - Posted by Ben (NJ)

Posted by Ben (NJ) on August 13, 2003 at 08:37:58:

tax liens don’t go to sheriff’s sale unless there is a federal lien involved. Therefore the older lienholder would not be forced to sheriff sale. He may however be paid off by the mortgage holder.The subsequent lienholder would be paid off by the mortgage holder as well. albeit it with interest and penalties. The end result will probably be that the mortgage holder gets this property through mortgage foreclosure. I doubt they will walk away from $105,000 but stranger things have happened.

Re: One flaw in your thinking… - Posted by Shaun (NJ)

Posted by Shaun (NJ) on August 13, 2003 at 20:10:47:

I was not aware that a tax lien that forecloses does not have to go to sheriff sale. If a tax lien forecloses and no one redeems it prior to the forclosure proceeding, including other lien holders, does that mean that the property is turned over to the foreclosing lien holder? There has to be more to it then that. No public auction? On this particular property the my goal in buying the tax lien is to eventially foreclose on the property myself. If I own the tax liens and I keep filing a notice of settlement they will have a hard time selling it to anyone but me and if it takes too long to sell it to me I can start foreclosure proceedings. This obviously is new ground to me most of my properties were bought in a more traditional way.

Can you recommend a good course or books on this subject? I have had a hard time finding books about tax liens in NJ.

Take my word for it… - Posted by Ben (NJ)

Posted by Ben (NJ) on August 13, 2003 at 20:57:08:

I’m a tax foreclosure attorney and own a large portfolio of tax liens. The only NJ specific book I know of was authored by Merle Coslick and was for sale on a site that doesn’t exist anymore. You can get a very technical legal manual from NJ Institute for Continuing Legal Education in New Brunswick but it may be much more info than you are looking for. I don’t have their number handy but call 411. Also try “The 16%
Solution” by Joel Moskowitz,not NJ specific but a good basic book.