Go Ahead - Be A DeedGrabber! · Go Ahead - Be A DeedGrabber! · ·

Go Ahead - Be A DeedGrabber!

© Copyright 2008, Richard Dawson Page 2

Go Ahead, Be ADeedGrabber!

Start Getting Deeds to Tax Sale Property

WITHOUT Attending Auctions or Buying Tax Liens

By Rick Dawson

© Copyright 2008 Richard Dawson



Legal Disclaimer

This book is intended to provide accurate and authoritative information on the subject of taxsales and purchasing property that is in some stage of the tax sale process. It is offered withthe understanding that the author is not an attorney or accountant, and is not offering legal ortax advice. Please consult with an attorney in your area before you proceed with any of thesuggestions found in this book.

This book is intended for instructional purposes only. Every effort has been made to reflect theapplicable laws as of the date of the publication of this book. However, this is a dynamic fieldof endeavor in which new laws are enacted, old laws revised and/or reinterpreted on acontinuing basis and where statutes, rulings, and case law are constantly changing. Readersare advised to proceed with the techniques described herein with caution. The author,printers, licensees, nor distributors make no warranties, express or implied about themerchantability or fitness for any particular use of this product.

© Copyright 2008, Richard Dawson

Published by

DeedGrabber.com

PO Box 3348

Munster, IN 46321

219-712-9722

www.deedgrabber.com

All rights are reserved under State and Federal Copyright Law. No part of this book may bereprinted, reproduced, paraphrased or quoted in whole or in part by any means without the

express written permission of the publisher and author.



Introduction

I’m glad you’ve decided to give “DeedGrabbing” a try. In case you’re not asubscriber to my email list, “DeedGrabbing” is the process of getting deeds to taxsale property from the owner right before the owner loses the property to taxes.I can’t take credit for making up the term; it was actually made up by tax saleinvestors who thought they were about to get a bargain property before I camealong and bought the property directly from the owner. Now that we’ve definedDeedGrabbing I won’t have to put it in quotes any more!

I’m sure you’re looking forward to getting started. As an avid reader of ebooks,I’ve always been annoyed at the fluff that many writers introduce into thematerial in the beginning and throughout. Therefore I’ve left off Chapter 1 (“HowI Went From Living in a Tiny One-Bedroom Apartment to A McMansion in 2 ShortYears”) and Chapter 2 (“How to Motivate Yourself to Make Money in RealEstate”). Seriously though, I’m going to cut to the chase and make this as easyand step-by-step as possible.

Our goal is very simple: find unwanted property that we can immediately resellfor a profit. We will be finding owners who are about to lose their property,purchasing the property, and reselling it for a profit. That’s it; “buy low and sellhigh” at its simplest. Or maybe “buy super-low and sell low” would be a betterdescription. We’ll be looking to make $5,000-$20,000 on most deals, andoccasionally get a whopper where we can make $100,000 or more.

In case you’re new to tax sale investing or real estate investing in general, let’stalk a little bit about the tax sale process and how it leads to opportunities to



acquire real estate for pennies on the dollar, without going to auctions andinvesting large amounts of money.

Every state in the country has a process for handling real estate on which realestate taxes are not paid. Sometimes you’ll even find that there is an alternateprocess for a certain city or county within your state. In all locations, it’s safe tosay that if an owner ignores the payment of his or her property taxes for longenough, he will lose the property and an investor or the local government will geta chance to purchase the property or otherwise take title away from the owner.

In some states it takes several years of non-payment of taxes to result in aproperty being put on the sale list. And sometimes there is an additional time forthe owner to bail out the property after the sale.

We will be finding the owners who are at risk of losing their property, and buyingit before it’s lost.

Your first job will be to look up your state’s tax sale statute and to get a goodunderstanding of the process. In most cases the statute will only be a few pageslong, and you will only be paying close attention to the parts which concern us asDeedGrabbers (Chapter 1). Studying the statute a few times will give you a goodidea how your state’s tax sale process works, and you’ll find the rules are usuallypretty simple once you grasp them. It doesn’t hurt to go to your local county taxoffice and talk to a clerk once you’ve read the statute to make sure youunderstand everything perfectly.

While you’re there speaking with the clerk in the tax office, you’ll also find out thedate of the tax sales in the past or future that will give you the properties at riskof loss, and get a list of the properties (Chapter 2).

Next, you’ll update the owner addresses on file with the county and try to get aphone number for each owner. You’ll do this by uploading the owner addressesyou got from the county to a website that will return updated addresses andphone numbers if available (Chapter 3).



Once you have the best information possible, you’ll send letters to the owners ofthe property, letting them know about the tax sale of the property and offering totalk to them about buying the property (Chapter 4). Mail is all the contact you willneed to do to make money. But if you want to double or triple your business, callor visit the owners as well (Chapter 6).

You’ll be offering to purchase the property for a small amount of cash-in-hand tothe owner, and you’ll take the property subject-to the back taxes, meaning youwon’t pay them off just yet (Chapter 7). Your contract will state that you can backout of the purchase agreement if you don’t like what you find out about theproperty later, before or after you get the deed. Don’t bother doing any seriousresearch on the property until you have a deal penciled in with the owner!

What do you say to the owner when they call or you call them? We’ll talk aboutthat in Chapter 5.

After you’ve struck a deal with the owner, you’ll either close the dealimmediately, or do some further research on the property. This will be covered inChapter 8.

Once everything looks good, you’ll quickly prepare the paperwork and send out amobile notary who will take it to the owner to get signed and notarized (Chapter9).

Now it’s almost payday. Depending on the situation, we’ll get the propertycleaned up a bit and get rid of any junk on the premises. Then we’ll get a Realtorout to the property and get it listed on the MLS. Or maybe you’ll want to rehabthe property or sell it on contract to someone. I personally like to cash out in as-isshape and move on to the next property (Chapter 10).



Wouldn’t it Be Easier to Just Invest Right at the Tax Sale?

Right now you might be thinking it would be easier to be a tax sale investorinstead of a DeedGrabber. Plus, you’ve seen websites and infomercials that showthe incredible bargains that investors have gotten at tax sales (the $286.12 house“free and clear” on TV comes to mind). If $286.12 for a free and clear housesounds sexy to you, I’ll tell you first that I’ve gotten deeds to houses for as little as$10.00, so you won’t be missing out on super-bargain purchases.

Not only is it more time-intensive to be a tax sale investor than a DeedGrabber, ittakes a lot more cash and involves a lot more risk.

If you buy liens or deeds at a government tax sale, you will have to researchhundreds or thousands of properties when the delinquent list comes out, andassign a value you are willing to pay for each. Therefore you will have to knowyour market extremely well. You also may have to predict what properties maybe worth years from now when you actually get title to them through a tax lien(more on that later). You will not be allowed to inspect the interior of any of theproperties you’re researching, and the actual address of the property may evenbe difficult to pinpoint based on the information in the list.

After you have driven around the county until you’re blue in the face, andattempted to assign a maximum value you are willing to pay for each property,you will then attend a sale with other bidders.

If the county is offering a deed to the property (immediate ownership) you will bebidding against many other investors, many of which will likely bid the price of theproperty to near retail value. No money to be made there.

If the county is offering a lien against the property, which you will use to try to getownership of the property later, you will have to wait 1 to 5 years to acquiremarketable title to the property, and along the way you will probably be paid offby the owner or a mortgageholder. I would estimate 95% or more of liens are



paid off during the course of the tax sale process, resulting in no propertyacquisition by the tax sale investor. You are also risking that the property willsustain damage during the acquisition process, and will not be in the samecondition as it was when you made your bid.

Finally, there is potential for legal problems throughout. You will most likely haveto hire a lawyer to send notices to owners and lienholders on every property lienyou buy. And finally, whether you got a deed directly from a deed sale oracquired it through your tax lien, you will probably have to do an additional legalprocedure called “quiet title” to get marketable title. The quiet title procedure iswhere owners and other interested parties love to crawl out of the woodworkand challenge your deed. I’ve seen tax sale buyers invest up to $20,000 inadditional legal fees to protect their deed from being overturned in the quiet titleaction.

Contrast this with buying unwanted properties now, with little cash invested, andmaking immediate profits.

I hope you’re convinced that DeedGrabbing is the way to go. Now let’s look intoeach step of the process in greater detail.



Chapter 1

Learning the Tax Sale Procedure in Your Chosen State(s)

Before you get started contacting owners and buying properties, you need to takea little time to learn how the tax sale works in your state. I recommend starting inyour home county to learn the procedure your state uses to processtax-delinquent properties. As you begin DeedGrabbing you will see that it is quiteeasy to work in other states as well, even if they are far away.

In general, your state will be a deed state or a lien state. A few states have bothliens and deeds. The easiest way to get started is to go to www.taxsalelists.comand under the “Resources” tab, click “Tax Sales”. Then register for a free account. This site is geared toward investors who want to invest directly at the tax sale,not DeedGrabbers like us, but it also has a lot of resources we will use later.

After you get your confirmation email, log in and follow the “Resources” -> “TaxSales” procedure again. You’ll find a map of the US that is color-coded to showwhich classification your state falls under. If you click on your state on the map,you will see a display on the left which will give additional information.

So what is the difference between a deed state and a lien state?

Counties in a deed state generally auction off delinquent properties at a periodicsale, and the winning bidder is awarded a deed to the property immediately. Thatbidder now owns the property, free and clear, and after doing some additionallegal work, can sell the property or do with it as he or she wishes. This also means



that the owner of the tax property loses it permanently if the taxes are not paidbefore the sale.

In a lien state, the county only sells a lien against the property to recover theunpaid taxes. Unlike a winning bidder at a deed sale, the investor who buys thetax lien does not usually have any ownership rights in the property at that timethe lien is purchased. However, after a certain amount of time set out in the statestatute, called the redemption period, the investor can apply for a deed to theproperty. If the owner pays the taxes during the redemption period, the moneythe bidder invested in the lien is returned with interest, and the lien is released.

We as DeedGrabbers are looking for what I call the “Drop Dead Date” for theowner. That is, the date that the owner will lose the property permanently. If theproperty is in a tax deed state, the Drop Dead Date will usually be the date of thetax deed sale. If the property is in a tax lien state, we first need to find out whatthe redemption period is in the state. Say the redemption period is 2 years; theDrop Dead Date will be 2 years after a tax lien against the property is sold.

These are very general guidelines. Each state is different, and little details canmatter. Here are some interesting variations I’ve encountered in some of theareas I’ve researched:

Indiana and Washington, DC: Both issue tax liens against property, andhave a one-year redemption period after which the tax lien holder canapply for a deed to the property. Indiana has a strict one-year deadline to

redeem, and will not accept redemptions past the 365th day after the sale.

However, Washington DC allows redemptions all the way until the courtgrants the investor his deed, which may be a significant time after the endof the redemption period, especially if the owner appears in court to ask forextensions.

Florida: Offers liens as well, with a fixed redemption period. However, atthe end of the redemption period, the investor does not get the property.The property is auctioned at a tax deed sale which generates the money to



pay off the lien. Therefore you would ignore the lien sales, which do notresult in the loss of the property, and concentrate on the deed sales, whichdo result in loss of the property.

Even though Georgia is a tax deed state, it is a redeemable deed state,meaning that even though the bidder at the sale gets a deed, it can be setaside if the owner pays the delinquent taxes within a certain amount oftime after the tax sale. Therefore for our purposes it is more like a tax lienstate because the drop dead date would be some fixed period of time afterthe sale.

Texas offers liens against property with a fixed redemption time. Thoughthe investor who holds the lien does not have ownership in the property atthe time he buys the lien, I’ve heard that he can legally demand rent andevict occupants while he is just the lienholder!

This is not meant to be an exhaustive explanation of how all states’ tax saleswork. You will have to read your state’s statute carefully, and confirm withyour county that your understanding is correct. What I’ve tried to show here isthat each state will have quirks that could be important to understand. Also,while you’re at it, take note of the name of the governmental agency thathandles delinquent property taxes. This could be known as the “auditor”,“treasurer”, “tax collector”, or something similar.

All you have to do is put yourself in the shoes of an owner who will stop payinghis property taxes forever. When will his property be offered at some kind ofsale? Will he lose his property right then? Will he get more time after the saleto pay, in the case of a lien or redeemable deed? How much longer? Will hebe able to redeem all the way until the deed is actually issued or even beyond?

Let’s look at the statute in my home state, Indiana.



Tax Lien State Example

I’ve researched many states’ statutes and in every case I’ve been able to findthe statutes online. On the off chance your state’s statutes are not online, goto the library and find the latest written version.

I simply Google “[state name] code” or “[state name] statutes”.

When I Google “Indiana Code” I get:



There it is, right in the first position. Try to find a version where you can startat a root page and go deeper into the code by clicking on main headings. That’swhat we find on Indiana’s main page.

When I go to the main page, I click on Title 6 (“Taxation”), then Article1.1(“Property Taxes”), then Chapter 24 (“Sale of Real Property When Taxes orAssessments Become Delinquent”). I notice that I’ll want to read Chapter 25also, “Redemption of and Tax Deeds for Real Property Sold for DelinquentTaxes and Special Assessments”.

Your state may have the information listed first under “Property” and then“Taxation”. Search around these two key words until you reach a sectionabout delinquent property sales.

I’ve included sections of the Indiana Tax Sale Code in Appendix 1 that we’regoing to discuss, so you can read along if you wish while we discuss theexample. Or go tohttp://www.in.gov/legislative/ic/code/title6/ar1.1/ch24.html to view it online.

We’re not interested so much in the period before the property hits the salelist. We’ll let the county figure out which properties are delinquent andcompile the list. However, it’s a good idea to read it over quickly to get abackground on the process.

We see that the county treasurer sends a list of delinquent taxpayers to the

county auditor on or before July 1st each year, or 51 days after the taxpayment due date, and that the taxpayer stays on the list unless he pays histaxes. This is the most preliminary stage in the tax sale process.

The next few sections describe ways that the taxpayer can be taken off the list,and prescribes noticing that the county must do to each taxpayer on the list.Then IC 6-1.1-24-4.7 states that after the notices are made, the auditor mustapply for judgment and order of sale of the property.



The next section, IC 6-1.1-24-5, describes the conduct of the sale. This isimportant because it will state the terms of the sale.

Subsection (e) states: The county treasurer shall sell the tract or real property,subject to the right of redemption, to the highest bidder at public auction.

So, we know that there is a right of redemption for the properties that aresold. The rest of the chapter discusses technical details which generally affectpeople participating in the sale.

Now we’ll look at Chapter 25 to see how redemptions work, and learn how atax sale buyer can eventually get a deed to the property.

IC 6-1.1-25-2 describes the calculation of the amount needed to redeem theproperty after it is sold. You will usually just call the taxing body when youhave a deal and have them tell you the amount needed to redeem. However,it’s useful to have an idea how it works so you can estimate the amount whileyou’re dealing with an owner.

IC 6-1.1-25-4 is really the meat of the statute for DeedGrabbers. We see thatliens not sold under special circumstances have a period of redemption of 1year from the time of sale. Other liens, usually those that were not sold at aprevious sale (leftovers), or acquired by a government body, only have a 120day redemption period. From experience, I can tell you that liens or deedsthat are not sold the first time they are offered, are usually on worthlessproperties. Therefore we’ll concentrate on the liens that were sold the firsttime they were offered, which carry a one year redemption date.

In IC 6-1.1-25-4.5, we see that the tax lien buyer is entitled to a deed if theredemption period has expired, and they have given the proper notice to theowner and other interested parties in the property.

Since the redemption period is 1 year for the liens we’re going to research, weknow we must add 1 year to the date of our county’s last sale, and then we’llarrive at the drop dead date for the property offered at that sale. Other



counties in the state may have held their sales on different dates, so we mustremember to recalculate the sale date for each county we want to research.

As we touched on earlier, Indiana, as well as most other tax lien states, issuesa deed some time after the redemption period ends, and this can be manymonths after the redemption period. You will want to search your state’s codeto see if it allows for redemptions after the redemption period ends but beforethe deed is issued. Indiana is strict in not allowing redemptions of any kindafter the redemption period ends. Washington DC allows redemptions afterthe redemption period but before the deed is issued. If you find out that yourstate allows redemptions after the redemption period, you will know that youhave additional time to work with an owner to buy their property, even afterthe redemption period ends.

I’ve researched Indiana, and I’ve found court cases on Google that have upheldthat redemptions may not be made after the deadline, and judges are not ableto grant any kind of redemption extension.

You would do well to call a couple counties in your state and ask if they’ve everheard of anyone being able to redeem properties after the deadline, even ifyou don’t find such a provision in your state’s code.

Tax Deed State Example

If you’re going to work in a tax deed state, your homework on the statuteshould be much easier. In most cases, the process is much simpler. Thedelinquent property is placed on the tax deed sale list, and if the owner doesnot get the property removed from the list by paying the taxes or takingadvantage of some other provision in the statute, and the property sells at thesale, they lose the property. Therefore you will simply obtain the tax deed salelist, and the date of the sale is the drop dead date.



One thing you will want to look for very carefully in the statute is a provisionthat allows the owner to redeem the property after the deed is issued. Let’slook at Georgia’s statutes for an example of this.

Google “Georgia Codes”. The first item in the listings says “GeorgiaUnannotated Code – General Assembly Search”. Bingo.

Actually, this takes us to a search page. I’ve had a hard time using searchboxes to find the codes, so I’m going to look for the entire Georgia code. It’sright under “Legislation” -> “Code of GA”.

I see a heading for “Revenue and Taxation”, and when I click on that I see “TaxSales” right in chapter 4. Article 1 looks like a good place to start.

Article 1 (48-4-1) states that the property shall be sold in the same manner asprovided for in executions and judicial sales. Further, 48-4-6 states that thevalidity of the deed shall be the same as that from an execution sale from asuperior court. So far, it sounds like the sale is final.

But when we keep reading on to Article 3, we see that 48-4-40 states:

Whenever any real property is sold under or by virtue of an execution issued forthe collection of state, county, municipal, or school taxes or for specialassessments, the defendant in fi. fa. or any person having any right, title, orinterest in or lien upon such property may redeem the property from the saleby the payment of the redemption price or the amount required forredemption, as fixed and provided in Code Section 48-4-42:

(1) At any time within 12 months from the date of the sale; and

(2) At any time after the sale until the right to redeem is foreclosed by thegiving of the notice provided for in Code Section 48-4-45.



So we see that there is actually a redemption period of 12 months, andpossibly more if the giving of notice in part 2 is not done immediately after the12 month period.

Finally, we see in 48-4-43 that:

When property has been redeemed, the effect of the redemption shall be toput the title conveyed by the tax sale back into the defendant in fi. fa., subjectto all liens existing at the time of the tax sale

So even though Georgia issues tax deeds at the sale, you will add one year tothe sale date to come up with the drop dead date, and if someone contactsyou immediately after the one year redemption, you could see if there was stilla chance to redeem due to the notice not being sent yet.

Other Ideas to Research Your State

Reading your state’s code is the best place to start when researching yourstate. But sometimes the code is a little tricky to translate into practice.Consider these additional resources and ideas:

Pose as a tax sale buyer, and look for print and website information in yourstate that explains the tax sale to prospective tax sale buyers. Tell the tax clerkyou’re considering investing in the next tax sale and ask “if I buy a tax lien atthis tax sale, when is the owner’s absolute last chance to pay me off?”. Or ifyou’re in a deed state: “If I buy a deed at this sale, is there any way the ownercan still pay the taxes off at a later date and cancel my deed?”. The tax clerk isused to answering tax sale buyers’ questions and should be able to explain toyou when you can be assured you would be able to get a deed to the propertyif you were to buy at the tax sale. Then you will know the drop dead date foran owner.



Taxsalelists.com sells state manuals for tax sale buyers for many states. Theseare excellent and explain many details that may not be covered explicitly instate tax sale statutes. You should be able to determine when an owneractually permanently loses their property from the information in thesemanuals, and learn some interesting details in the process.

At this point, we’ve done our homework and we know when an owner loses hisproperty after it enters the tax sale process. The next step is to find out who is onthe verge of losing their property.

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