Mar 10
08
Tax deed sale question.. People with experience or in the know answer?
Posted by taxliensMy question is simple.
I own a tax deed on a piece of real estate that I got dirt cheap. I’m curious to know this: If the previous owner steps up and wants his property back - can he just take it back? What is the process for him to take it back? Shouldnt he at least have to pay me back the taxes that he didnt pay? The taxes and liens that were in default? I already know about tax deeds and how to buy them, etc.. I’m wondering what happens if the owners steps up and wants his property back?
Let’s see I can make some sense.
In states that provide tax deeds to the tax-lien buyer, the deeds are issued at the tax sale auction (although sometimes they’re held unrecorded). Deeds either wholly or conditionally transfer title to the subject property from the tax-delinquent owner to the successful bidder. In cases where the portion of property taxes is not paid along with the monthly mortgage payment (a PITI, or principal-interest-taxes-insurance, payment), the successful bidder is most often the first-mortgage holder. Furthermore, federal statutes provide that if government-insured financing (an FHA loan, for example) is in place on a property that’s sold at a tax sale, the government agency has one full year in which to redeem it. In other words, don’t count on moving in or immediately selling such a property the day after you purchase it at the auction.
In some states, after the tax deed has been issued, the successful bidder must then contend with the state’s statute of redemption, which is a law that allows the delinquent owner to reclaim the property by paying all back taxes, expenses, and accrued interest within a specified period of time. In most states, all lien holders of record must be served notice, and they are also given the opportunity to redeem the property prior to the expiration of the redemption period. Once the deed is actually issued to the new owner, all prior liens are extinguished.
In those states that issue certificates, forfeiture of property for tax delinquency does not convey ownership to the subject property. Instead, a tax-lien certificate creates a first-priority lien on the property with the right of foreclosure – again, subject to the state’s statutory right of redemption.
The buyer of the certificate pays the outstanding tax and other expenses. He or she must then wait through the redemption period. In order to redeem the property during that time, the delinquent owner must pay the certificate holder the full amount that was paid for the tax certificate, along with interest and sometimes expenses and penalty fees. The interest rate on tax lien certificates is set by each municipality and is often quite high, typically in the range of 15- to 20 percent, and can sometimes be even higher. If the tax-delinquent owner or another party with a possible legal interest in the property (such as an ex-spouse, an heir or perhaps a contractor holding a mechanic’s lien) does not redeem the tax certificate within the allotted time, the certificate holder must then initiate foreclosure proceedings. These proceedings are the means by which title will actually convey to the certificate holder.
However, even when foreclosure proceedings are complete, there still may be claims against the property or other problems in getting clear and marketable title. If this occurs, the investor must go to court for a "quiet title" action (which is a court procedure to establish ownership of real property when it’s under dispute). If the court’s decision favors the certificate holder, then he or she will receive clear title to the property; if it rules differently, he or she will lose the real estate and all money that’s been invested in it.