too much taxes owed on lot - Posted by Dave

Posted by Dave on September 03, 2003 at 24:05:09:

your answers are always appreicaited. thanks Dave

too much taxes owed on lot - Posted by Dave

Posted by Dave on August 29, 2003 at 10:54:32:

Found a lot with a old vacant mh on it and the taxes are more than the lots worth, $3500. 3 years behind 18% interest, this guy also owns a another lot in the same town and is $5500 behind on that one too. is it still worth contacting the owner or wait until it goes up for tax sale. Dave

This doesn’t quite pass the smell test - Posted by Dr. Craig Whisler CA NV

Posted by Dr. Craig Whisler CA NV on September 02, 2003 at 16:36:22:

I’ll give you a little tip about tax sales that most people don’t know.

First let me say that generally you would let these go to the next tax sale, BUT, I can think of one case where I might go for them. That is if the seller would just give you a deed for free or for a nominal sum because he has no equity whatsoever. First go to the taxing authority and ask them if they have any repayment plan for back taxes under which you could make monthly payments if you get these lots from their present owner. If so, you may be able to buy these lots with 100$ financing. I mean you get them free and also get what amounts to an ASSUMABLE loan from the taxing authority. Hey, Zero down, fully assumable loan with no qualifying and low monthly or quarterly payments! What more do you want?

Lots with old mobile homes presumably have all the utilities already installed. Thats good. You could replace old slummobiles with nicer mobile homes and have something worth a lot more than you paid for it. $3,500 and $5,500 doesn’t sound like a bad deal to me. What are similar lots selling for? I mean lots with all utilities already installed and zero down loans with fully assumable loans. YOu don’t care how high the property tax interest rate is if you can quickly resell them at a nice profit OR if you can rent them for more than the payments you work out with the taxing authority.

Ok, Ok, now here is the little known tip that I promised you above. You need to understand that it is always in the government’s best interest to have SOMEONE paying taxes on all the land in their jurisdiction. When lots accrue back taxes amounting to more than the lots are worth, such lots are resold (I mean they attempt to resell them) at future tax sales to try to get SOMEONE paying the taxes again. The pproblem is that often noone wants to bid on them if the minumim bid is the amount of back taxes (as it usually is) and that amount is more than they are wowrth?. If noone bids the county gets stuck with property it doesn’t want, and worse yet, it gets left with no tax income from said property. Ok now, if noone will pay that amount of taxes with back interest then either the government must keep this land forever or reduce the price. There is no other good choice. Most tax authorities don’t generally tell you this but if there are no bids at the last sale they will generally reduce or totally eliminate the PENALTIES AND INTEREST on such properties. This means they will be screaming bargains. Riverside County, CA does this. No stop and think a minute. Generally property taxes are about 1% per year of the lands assessed value. Assessed value is often about 1/4 of true value. This means the taxes are about 1/4-1% of the lands value per year. Who wouldn’t pay those amounts for 3-5 years of back taxes? You would be geting the properties for 5% or less of their true value.

Can you tell me how these two properties happen to have more oweing than they are worth, even after 3 years back taxes have accrued? Something doesn’t add up with your facts and figures. If lot 1 (the $3,500 lot) had a fair market value of $1k and was taxed at 1% per year, wouldn’t that be $10 per year for taxes? Now if you figure 18% interest per year on that $10 it would only be $1.80 in interest or $11.80 after one year for taxes AND interest. Then figure 18% of that amount for the second year, then the third year. How can 3 years taxes, even with 18% per year added on amount to more than even $100? How are you figuring it to come up with $3,500?

In the answer may lie the key to some great deals. I would try to get to the bottom of this. This doesn’t quite pass the smell test yet, but I think I smell a deal here somewhere, don’t you?

Regards, doc