“Too good to be true!” That’s what you should have thought before you scooped up that house in a tax foreclosure. Instead, you thought to yourself, “It’s like taking house-shaped candy from a baby.”
Can you actually buy a house for as little as a few hundred dollars of unpaid taxes?… Well, kind of.
You can certainly obtain the title of a house at a tax sale or an HOA foreclosure, but you’ll probably take it subject to all sorts of encumbrances. Generally, people who lose title to their homes for a few hundred dollars in taxes have bigger, worse debts tied to the property already. Don’t put a patch on a sinking ship, and certainly don’t buy that ship on its way down.
Here are two common problems that a little homework would have prevented:
- You just bought a piece of property with a market value of $200,000. You think you got a great deal because all you paid was $15,000 to the HOA. You’re then stuck with former homeowners who now refuse to leave, but you know that you can always evict, which you do, but that takes 4 months (and more money) to resolve. Then, guess what! The homeowners come up with enough money to pay off the debt and exercise their right of redemption. After all these very stressful months, they get their title back, and you’re totally shocked that this is legal.
- You just bought a piece of property with a market value of $200,000. You think you got a great deal because all you paid was $3,000 to the county for back taxes. This property has long been abandoned, so you don’t even have to worry about tenants! Yay! You then pump $20,000 into this property and raise the market value to $260,000! Then, just as you’re about to put this money maker on the market, you get a notice of foreclosure from the bank. The original mortgage was in default. To cure that default, you need to come up with $270,000, or the bank will foreclose and take title based on its superior lien on the property. This is when you cry.
There are ways to prevent these situations, but too many would-be millionaires fail to take the necessary precautions before diving headfirst into the market. Are you thinking about flipping houses in your spare time? Need some help? Call us today. (832) 305-7694.