Stock photo from www.sxc.huIn recent years tax sales have become a popular investment tool. However, while you may end up with a piece of property at a fraction of its value, you need to be aware of the limitations of your investment. Today, I'd like to discuss what you need to know.
First, the basics: What is a Tax Sale?
A tax sale is a procedure used by investors to buy property (usually houses or other buildings) that is sold by the government. The government gains the right to sell the property because the owner has failed to pay taxes on the property. Usually the investor needs only pay the amount of the tax owed in order to obtain the title. The title comes in one of two forms; either by a tax deed or a tax lien. At some point I may give more detail than this. However, it is outside the scope of this post, so for now I will wait.
Second: What are the limitations to Tax Deeds or Tax Liens?
It is important to know that tax deeds and tax liens have limitations. It is equally important to read and understand the paperwork before making a decision to purchase a property via a tax sale. Here is an example:
In a recent case, an investment company bought a piece of property via a tax sale from the City of Savannah, GA. The property was home to a vacant and dilapidated building. According to the tax deed, the City kept a "Right of Redemption" to the property for up to 12 months after the sale. This meant that the city could come back, up to a year after the sale, and buy back the property - for any reason whatsoever. The deed also said that the investors' interest was second to the City's Right of Redemption.
The trouble started when, 11 months and 24 days after the sale, the City came to the property and demolished the building. The investors sued the City for trespassing and sought to recover the value of the building. However, when the court read the tax deed, it decided that the deed was crystal clear: since the City retained the right to buy the property back, it was still the legal owner of the property. Thus, it was entitled to demolish the vacant building.
So, the bottom line is this: tax sales can be a great deal, but only if you fully understand the limitations of them. You must do your research up front and know what you're buying. Also, if you don't completely understand the deed, lien, or other documents, it is well worth your time and money to get some legal advice. Please do not make the same mistakes as others have made before you.
*The case is Brown Inv. Group, LLC v. The Mayor & Aldermen of the City of Savannah, 10 FCDR 1576 (GA Court of Appeals, 5/21/2010).
Blog written by Kim Perez and transcribed by Jessica Oglesby
Posts
Post a Comment 0 comments: