Real Estate Opportunities - Delinquent Real Estate
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Delinquent real estate is not a common thing, but most investors think of it as a profitable avenue. Delinquent real estate is a property whose owner is unable to pay the required taxes on the estate in a stipulated period. After a delay period, this property is put up for a sale to help recover the income lost in unpaid taxes.
As every real estate owner probably knows, real estate taxes are payable by July 1st every year. If the taxes are not paid in good time, they become delinquent by 1st October and 1st January. The October delinquency is on the first installment and the January 1 on the 2nd installment. Another important aspect here is that no property owner can get away by not paying even if he or she has not received the tax bill. If the owner does not pay the tax during this period or does not settle his tax bills along with the requisite fines and charges, he can still lose the property. Penalty on delinquent real estate is at a sharp 1% per month until the bill is fully paid.
If the delinquent real estate comes under a tax recovery sale, it can be sold either as a tax lien or as a tax deed sale. A tax lien means an investor can place a bid only on the tax debt and not the property directly. This implies that the investor is theoretically willing to lend money to the debtor for paying his taxes. If the bid is successful, the investor pays the tax bill along with any extra charges on behalf of the owner. In return for this, the owner gives the investor first lien position on title, ahead of all mortgages and titles. The investor will then receive the tax paid as well as any accrued interest. If the owner still does not pay taxes, the investor can foreclose the estate and take title of the property.
On the other hand, the Tax deed sale is where the investor bids on the property. The winner of the bid purchases the property with full rights and no debts at a fraction of the sum of the property’s market value. Since tax values are much lower than actual estate values, the investor walks away with a great property at low rates.
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