When Tax Lien Sales Go Wrong, the Public Blames You

When an Arizona veteran lost his home over unpaid property taxes, he said it came as a complete surprise to him and an example of what happens when tax lien sales go wrong.

The veteran had applied for a property tax reduction program several years ago, received a discounted rate on his taxes, and paid them consistently since that time. Unfortunately, those payments did not register in his local county system, and the home was sold at auction over a mere $326 delinquency.

Now, the new owner, an investor who paid $4,400 for the home, wants $30,000 for the property or requires the homeowner to move out. The situation has deteriorated rapidly, with the veteran threatening to expose the buyer’s criminal past and the investor quickly tiring of being threatened over a property he purchased legally through the county tax system.

Naturally, the national press got involved, further vilifying the investor and muddying the waters. It’s anyone’s guess how the controversy will end, but recent updates on the case seem to indicate the investor’s money will be refunded and the veteran will get to keep his home since he did make a partial payment (believing it was the full payment) when he was notified of the pending tax sale.

Sadly, in the interim the investor has been dragged through the mud and the homeowner has had to wonder daily if he would be able to keep his home.

A perfect example of what happens when tax lien sales go wrong, so, what exactly happened here?

This is a perfect example of what happens when tax lien sales go wrong and when tax lien investors are less than sensitive (and distant) when dealing with the foreclosure process. In this instance, neither the investor nor the homeowner did anything wrong to start. The investor bought the property fair and square, paying more than 12 times the amount of taxes owed on the property to the city in order to acquire the property. The homeowner believed he had paid his taxes in full and, furthermore, paid additional money when it came to light that he stood to lose his home if he failed to do so. That payment, by the way, did not register with the city until after the tax sale, which is why the home was sold at auction. The city itself has admitted it is at fault.

The issue, then, lies largely in the fact that the investor took it upon himself to knock on the door personally and confront the homeowner, who reacted, as might be expected, with dismay and a certain degree of aggression. There are many, many “gurus” teaching tax lien investing out there who recommend this tactic, and I have heard so many of these so-called experts recommend dealing with homeowners in exactly this manner, offering to sell the home back for many times more than what the investor paid for it (on public record, by the way) or simply pointing out that they can and will evict the homeowner as soon as the law allows.

This is not productive in most cases, and it will always give real estate investors a bad name when you do it. It also makes it really easy for the local press to make you look like a complete villain when you were just trying to make the truly thrilling returns available to tax lien investors! Remember, making great returns is completely legal, but many homeowners and the general public have been “trained” to see profits as evil. It’s a shame, but it’s the truth, and when it looks like you are making double-digit returns by buying low and selling high, some people will get very nasty very quickly. Since most people do not really understand how tax sales work, they will have a hard time understanding why you might feel you are losing money when they are offering to simply make good on your purchase so you can “break even” and they can keep their house.

What is the solution?

At PIP Group, we handle the tricky tax sale process for our investors using a completely transparent process that lets you monitor how things are going in each investment as it progresses but keeps you a healthy distance from that investment property. We have been successfully investing in the tax lien and tax deed space for more than a decade and have a great deal of experience in protecting your investment capital and your returns. You can learn more about our process at PIPGroup.com.

Notice we didn’t use names or counties in this report? That was on purpose. Both the homeowner and the investor have been through enough without us using them as examples of how not to handle this situation. While the scenario is an important one for tax lien and tax deed investors to keep in mind, we see no need to further vilify this investor who probably was just doing what he believed necessary to protect his investment. The national media has done that enough already.

 Related articles: 

The Huge and Hidden Potential in Pre-Deed Investments

Why 32,000 Tampa Bay Property Tax Bills Went Unpaid in 2018

FBI Arrests Investment Advisor Who May Have Used Tax Lien Investment Funds for Personal Expenses

 

About the Author

Charles Sells is the founder and CEO of The PIP Group, a turnkey service provider that focuses on investments in distressed real estate assets including tax liens, tax deeds, traditional foreclosures, fix-and-flips and long-term cash flow acquisitions. He has been involved in tax lien investing for over 20 years, during which time The PIP Group has grown to become one of the largest agencies of its kind with nearly 1,000 individual and institutional investors worldwide.

Leave a Reply 0 comments

Leave a Reply: