Tax Sale Pitfalls - California - Posted by JoeSoCal

Posted by JoeSoCal on July 30, 2003 at 22:55:30:

P.S. I realize that there are some liens (city weed abatement, etc.) that may not be extinguished at the sale.

If I am missing anything obvious, please slap me upside the head.

thanks again

Tax Sale Pitfalls - California - Posted by JoeSoCal

Posted by JoeSoCal on July 30, 2003 at 22:30:52:

I have been looking into tax sales and trying to get a better understanding of how they work, etc. I am primarily speaking in reference to vacant pieces of land.

From my study and research, namely through the archives here, it seems that I should be aware of a few things that can present themselves as obstacles.

  1. Lack of due diligence
    tax collector/assessor mistakes, parcel number
    or land use mistakes, landlocked, etc. things of
    that nature

  2. IRS liens, which are not wiped out by the tax sale.
    Thus, the IRS has the right to redeem the property for
    what you paid plus interest.

  3. Inability or difficulty to acquire title insurance

What else am I missing? Thanks

Re: Tax Sale Pitfalls - California - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 31, 2003 at 10:34:36:


I don’t worry about the IRS liens, and I recommend you do the same. They evaporate after 120 days if they were notified of the sale. I do often ask the treasurer/tax collector’s staff if they notified the IRS of the tax sale for those property whose owners have IRS liens against them. They always say “Yes.”

John V(FL) does give a good list of things to watch out for. Although in CA the one about the application for a tax deed does not apply.

However, here is the main thing: is the property usuable? Is it attractive to other people, your potential buyers? You might want to study some books on investing in land.

Here are some of the main things to be concerned about, from my perspective:

Size–big enough for use, with setbacks, distance between well and septic systems, etc. In some areas zoning requires a certain size to build and the lots are individually too small to qualify. True in Santa Cruz County, CA, big time.

Access–not landlocked. Actually roads to the property, passible.

Utilities. It is expensive to bring in electric lines. It costs significant money to drill wells and construct septic systems.

Percolation. In rural areas, the soil has to accept a certain amount of water to allow putting in a standard septic system. Special systems cost more and if they are required the value of the property is lower to the buyers.

Location. Close enough to the things people want to get to.

Topography: suitable for the purpose. Easy to build on is good. If there is a view, that is good. If there are trees, good, and streams or lakes, that is good.

Good Investing********Ron Starr*************

Re: Tax Sale Pitfalls - California - Posted by Kristine-CA

Posted by Kristine-CA on July 31, 2003 at 10:24:55:

There are a few others: Well, there are areas where land and houses are separate. Both are secured properties but have separate APNs. If you bought the land, you’d have to deal with the costs of acquiring the house. But if you buy the house, you’ll be dealing with the land owner. This isn’t just mobile homes by the way. The desert has all kinds of strange land deals.

Also, one of my concerns has been what if the property, which is probably uninsured, is damaged or burns between the time you buy at sale and the time they issue the deed? I’ve always wondered if the county would be reasonable on that one and refund your money.

Don’t let all this stuff scare you. Tax sales can be a good place to buy if you pay attention. And know your maximum bid. The last Kern county sale was full of overbidders. Junker houses going for 50-60K in neighbhoods where the maximum FMV is 75K. But there are still deal out there.

Sincerely, Kristine

Re: Tax Sale Pitfalls - California - Posted by John V, FL

Posted by John V, FL on July 31, 2003 at 24:43:33:

How about:
*legal descriptions on the application for tax deed that don’t match the property appraiser card
*improper notification by the county to a party with an interest to the property
*special assessments by a municaplity (usually bond issue for road, water or sewar)that are of record but not in the public records or in the tax sale title search
*inability to gain possession to the property while tied up in court for years not being able to collect rent or insure the property
*restrictions or dedications runnig with the land that render it worthless even if assessed high.
*easements that may or may not be recorded that make the land unbuildable
*environmental problems, toxic waste, or underground storage tanks that you are personally liable for the cleanup when you buy it
*drainage, overflow from adjacent parcels or fill problems making the lot economically unfeasible for development
*house built on two lots owned by same owner that the proeprty appraiser shows as being only on the lot being sold at tax sale
*depressed areas with high lot assessements but zero land residual where your ony buyer is Habitat for Humanity or the neighbor

Re: Tax Sale Pitfalls - California - Posted by Barry Mellow

Posted by Barry Mellow on July 30, 2003 at 23:18:48:

What you are missing is Title Insurance. That is why you have title insurance. Just get the extended coverage title insurance and then don’t worry about anything else.