Tax Sale Question

Discussion in 'Homesteading Questions' started by Timberline, Jun 8, 2006.

  1. Timberline

    Timberline Keeper of the Cow

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    Hi all, I'm looking for some insights. We made an offer on a property (Colorado) and the offer was accepted. After it was accepted the realtor said "Oh by the way, this property was a tax sale." Turns out the seller bought the tax lein 7 years ago and now has a Treasurer's Deed. But, apparantly there is another 2 years for the previous owner to pay the back taxes and get the land back if he/she had been in the military, prison, institution, etc., and could not have been contacted by the County Treasurer. The seller is now going through records looking for proof that the previous owner had been notified (signed certified mail, etc) and ingored it. There would then be burden of proof on that person to prove they absolutely could not have been contacted for 9 years. The chance that this is the case is very remote, but it does exist. Title Insurance won't cover that particular risk, we are looking to see if any other insurance might cover it. It would be under 70K, so we're not talking millions here.

    From what I have been able to find out, according to Colorado State Statutes, a tax lein holder is able to get a Treasurer's Deed and the property becomes marketable after 7 years. (Why they don't wait the 9 years is beyond me). We have a couple weeks to back out, just waiting to see what the seller comes up with and waiting for my appointment with a real estate attorney.

    Just thought I'd see if anyone here has dealt with anything like this, knows real estate law, insurance, or has any thoughts about it. :help:

    Thanks in advance.
     
  2. almostthere

    almostthere Well-Known Member

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    Ummm...aren't they supposed to tell you that BEFORE you sign the papers?
     

  3. XLT

    XLT Well-Known Member

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    Uh... haven't posted here much (at all? maybe...), but have been lurking quite a while.

    Don't know everything about Colorado's laws, but in Texas, it doesn't matter where the person was at the time the foreclosure took place. I purchased one back in December that I am pretty sure the folks didn't keep an up to date address with the tax assessor, and so lost the property.

    One would think that being government employ, or government custody would help in contacting the previous owners, not hinder.

    It shouldn't be too hard to find out for one's self either, subscription to peoplefinder.com is pretty cheap. Also, while they may not be able to produce title insurance, a lawyer would be invaluable in the research.

    Also, what is the interest rate that they would have to pay if they redeemed the property. I know you want the land, but in TX, they have to pay 25% of purchase price and "all reasonable expenses incurred" in the first year, and 50% in the second. Not a bad deal either way you slice it.
     
  4. copperkid3

    copperkid3 Well-Known Member

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    Dwelling in the state of Confusion -
    I find it "interesting" (to say the least), that the realtor suddenly remembered to inform you AFTER the offer had been accepted. Seems that would be one of the "things" that an honest salesperson would mention at the start of negotiations. :nono:
    Since a Title Insurance company won't insure it as well.....that should be a clue that something isn't on the up-and-up. Have to agree with you that it seems strange that "a tax lein holder is able to get a Treasurer's Deed and the property becomes marketable after 7 years. (Why they don't wait the 9 years is beyond me)."
    At this point, you have a decision to make: Since the "tax-lien" status of property wasn't disclosed until AFTER the offer, the "offer" can be withdrawn without any penalty.....or it should be. Or you can take your chances, invest in the property with the understanding that if the previous owner shows up with the necessary money in hand to pay ALL previous taxes, penalties and legal expenses incurred (I would venture to advise you NOT to put ANY FURTHER MONIES into the property by way of improvements for at least 2 more years), that you will have to turn it over and not look back at your "dream property". :shrug:
     
  5. palani

    palani Well-Known Member

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    Tax deeds are bad news. This is the only event that can interupt the chain of title from the original land patent.

    Anyone who holds title through a tax sale holds only an equitable interest in the property. Someone else is the owner.

    The state never owned the property to begin with so how can they seize it and sell their interest to another? They have no interest to sell except for the tax owed (if valid). All you are buying is the note for taxes owed.

    When Colorado became a state as part of their entrance into the union they gave all public lands to the federal government to be disposed of to the general public. The feds usually gives the state section 16 of each township to support the schools and that is about all. Is this property in section 16?

    If I tried this I would be jailed for fraud. Government gets away with it all the time.
     
  6. Iddee

    Iddee Well-Known Member

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    I would offer to buy an option to purchase lease agreement for 2 or 3 years, until the deed is fully cleared.
     
  7. rambler

    rambler Well-Known Member Supporter

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    Just my thought, such news would probably limit your use of the land for 2 years, pending a few 'ifs'.....

    That should lower the value of the property. Such things should be disclosed before bidding.

    I would forever feel 'had' on this deal, even if everything went fine from here on out.

    Others might not worry about that part, and just want what is there for what they bid on it.

    --->Paul
     
  8. agmantoo

    agmantoo agmantoo Supporter

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    Did you ask who will be paying all the property tax that is in arrears?
     
  9. Shadow

    Shadow Well-Known Member

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    Get out, get out now, you don't want to gamble 70 grand. If a property does not have a clear title for anyreason you do not want it.
     
  10. Unregistered

    Unregistered Well-Known Member

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    I second that. There is a very good reason why you cannot get title insurance. Why take a chance that those who make a living of taking chances will not.
     
  11. Obser

    Obser "Mobile Homesteaders"

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    I third Shadow's motion. You have been misled (to put it kindly). No ethical real estate person or seller would conceal a major title defect. Check the contract (offer) you signed to see if it is mentioned as a "disclosure". If it is mentioned, shame on you for not reading the fine print (but you were still misled). If there is no mention, it is fraudulent contract.

    Either way, get out, demand return of any “earnest money”, and find an ethical real estate brokerage.
     
  12. donsgal

    donsgal Nohoa Homestead

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    Yes, it is called disclosure and the realtor is duty bound to give a person any information that could negatively affect the property.

    I'd say that the OP has a valid complaint to file against the realtor with the state board of realtors.

    donsgal
     
  13. Hoop

    Hoop Well-Known Member

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    Tax sales CAN be very good purchases in some states. Colorado is NOT one of them. The fact that real estate can remain in a state of legal limbo for this long of a time period is just plain unacceptable.

    Immediately retract your offer to purchase based on the realtors failure to provide full disclosure. Don't waste your time or effort on something that very well result in you having the rug pulled out from underneath you.

    Every state is different regarding tax sales. I happen to think Wisconsin has one of the best. Failure to pay property taxes for 3 years starts legal proceedings against the real estate owner. Usually it takes a year for the property sale to take place. Previous owner has NO legal rights to the property after the sale. Nada, zilch, zero! This allows buyers to go about their business on properties they purchase at tax sales, without the uncertainty.
     
  14. XLT

    XLT Well-Known Member

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    It is quite possible that the realtor did not know prior to the offer. Disclosure is the responsibility of the seller, not the agent. The agent can only disclose information that he/she was given by the seller. In general, it is not fraud unless you can prove it was done with the intention to deceive AND that the deception specifically resulted in your purchase of the property.

    That being said, it is almost always possible to determine whether the property can be redeemed or not. The gamble is not on your 70 grand, the gamble is on whether you get to keep your land for the 70 grand.

    The original arrearage was paid at the time of the tax sale (that's the point of a tax sale), any taxes from that time forward are the responsibility of the seller. If they haven't been paid since the time of the tax sale, you can go check yourself at the county clerk's office for recorded liens.
     
  15. palani

    palani Well-Known Member

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    Hoop posted -
    Is this a legal opinion? Or a Lawful opinion? Or just an Opinion?
     
  16. Timberline

    Timberline Keeper of the Cow

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    Thanks everybody (I knew I came to the right place for advice). The real estate agent claims he didn't know about the additional 2 years, the seller told him after the offer was accepted. I have checked with other realtors in the area (small community) and they all think very highly of him and were shocked at the thought that he wouldn't disclose that info. The back taxes and taxes for the past 8 years have all been paid by the seller.

    As far as building goes, we have our homestead (free and clear, still celebrating that!) and were looking at this as an investment, so letting it sit for some time would happen anyway.

    Obser, no it was not mentioned in the contract as a disclosure, yes we read everything carefully.

    Thanks again, you guys are the best!!
     
  17. XLT

    XLT Well-Known Member

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    I believe wisconsin has a two year redemption period FWIW...
     
  18. palani

    palani Well-Known Member

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    You may be talking about the rules established by a state government that is not lawfully in privity with its' own constitution or the federal constitution; i.e., insurgent under the rules established by congress during reconstruction. Wisconsin is not alone in this status.

    If you believe in the tooth fairy and santa claus I guess you can live where ever you want and believe what you want to believe. Please don't let me get in the way of your future success and happiness.
     
  19. XLT

    XLT Well-Known Member

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    OK...you're right...without upending the entire nation's system of laws and governance...accepted by the majority of the population...Wisconsin has a two year redemption period...FWIW

    Please do not concern yourself with the gain or loss of my success or happiness, present of future. I am surely not concerned by your influence upon either.

    Have a nice day, and God bless,

    XLT
     
  20. Jenn

    Jenn Well-Known Member Supporter

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    CC- Back out of contract based on fraud then make new lower offer based on what it's worth to you with that risk. Maybe as a rent to own or promise to pay the 70,000 in 2 years when it's worth that much to you. Good luck- next week we're looking at a tax lien property the day before it goes on auction ont he courthouse steps just in case we're really willing to take ona property needing $100K or so repairs (estimates by our friend the neighbor who had thought anbout getting it himself)