In this interview between Brian Spitz and Kevin Price, Brian talks about how to sell a house with back taxes on it. Additionally, he addresses investors interested in purchasing foreclosed properties.

For more information on selling a property with back taxes, check out our post here. 

Kevin Price

Welcome back to “The Price of Business.” I am your host Kevin Price. Talking about you and your business. I get to spend some time with a good friend of mine, who I think is a brilliant individual when it comes to understanding the whole area of real estate investment—one of the most important areas out there. There is a boom industry even in this crazy economy, and maybe especially in this crazy economy. Brian is with—Brian Spitz is with the bigstatehomebuyers.com and I always enjoy checking out that page, particularly the investors section. Brian, welcome to the program as always. What do you have lined up for us on today’s program?

Brian Spitz

Good morning, Kevin. What I wanted to touch on today is issues about both selling a property with back taxes on it, but also for your investor listeners, talking about buying properties at tax foreclosure auctions, and what that looks like, and what the consequences of that are.

Kevin Price

Okay. Great. So go ahead and tee it up for us.

Brian Spitz

Sure. Okay. Well one of the things—and this may be pretty obvious to many of your listeners, but it’s not to everybody—there’s a lot of debts and liens that can be negotiated when you go to sell your house. So even your mortgage or—you know—credit card payments that have been charged off, or child support liens, there’s like title issues that are on a property, a lot of those can be negotiated, but the one thing that cannot be negotiated is your property taxes. So the property tax entities, they come first. They always collect every dollar due, and so it’s really important that if you—it’s really important to pay your property taxes every year. And it’s really important if you get behind, that you work out some sort of payment plan with your property taxes. We buy properties from people all the time who have gotten behind in their property taxes, and sometimes they get to us too late and they’re so far behind we can’t help. But a lot of times we’re able to—you know—stop foreclosure—you know—stop tax foreclosure or something similar and move forward with buying their property, getting them some cash out of it. Another thing that I’ve run into recently—and this is really regarding estates—is somebody passes away and you inherit a property—or whether or not you officially inherit it through a will or just it just gets passed down to you—it’s also really important that you notify the tax entities that the person has passed away, if there’s an over 65 exemption, or if there’s a homestead exemption. We’re buying a house right now, where the person passed away 6 years ago and they never took the exemption off. So they’re rolling back the taxes 5 and 6 years and adding penalties and interest. And it’s really making it uncomfortable for the seller.

Kevin Price

Right.

Brian Spitz

And honestly he never knew that he had to do that, so—

Kevin Price

Not to mention the fact that—you know—at some point you’re actually in the business of making money yourself. And so if it gets too tedious—you know—you’re going to find yourself not in a position to be able to help them.

And by the way, just to say the morality—the moral to that tail is that the sooner you get help when it starts to become distressed, the better.

Brian Spitz

It’s real easy not to face problems. People get embarrassed or ashamed of the situation, or just don’t want to deal with it. But it’s always better to face these things head on, then kind of—you know—ignore it and hope it goes away. And that’s kind of human nature. It takes a stronger person to really face these things. And we help people with that all the time.

Kevin Price

Yep. Absolutely. Absolutely. So when people are in distressed property situations, kind of give us a couple scenarios that you are often working with.

Brian Spitz

We—we deal mostly with inherited properties. And we can resolve and help resolve estate issues and chain of title issues. We deal with people that are getting divorced. We deal with a lot of people that have back taxes due on the property. Some people that are behind on their mortgage payments. And a lot of times people that just have a house that they’ve moved on from—so they either don’t want to repair it to sell it, or they just don’t—they want a quick sale for whatever reason, whether they’re relocating or building another house and they need to sell this one to qualify for the new loan. Those are all really common scenarios. And we’re really skilled at helping all of those people.

Kevin Price

Absolutely. You do it all the time. How long you been doing this now, Brian?

Brian Spitz

I’ve been investing and helping people with their real estate problems for eight years.

Kevin Price

Hard to believe.

Brian Spitz

And Big State has been officially in business for 5 years.

Kevin Price

That’s incredible. That’s incredible. Yeah, I’m sure like most—you know—real estate investors, you started like everybody else, and—you know—as a solopreneur doing it. And then eventually it just evolved into a business model?

Brian Spitz

Absolutely.

Kevin Price

Yeah. Very, very good. Go ahead.

Brian Spitz

The other thing I’m dealing with now with a property we’re buying—so I thought it would be interesting to mention, is buying properties at tax foreclosures. The tax foreclosure auction happens once a month, every Tuesday—the first Tuesday of every month—and it’s an opportunity for you to go out and bid on properties that the county, or the state, or whatever—the taxing entity—is foreclosing on. And you can usually get really good deals. I think you can get better deals at the tax foreclosure sales than you can at the mortgage foreclosure sale. However, there’s something that not everyone is aware of. When you buy a property at the tax foreclosure auction, the previous owner has a two-year right of redemption for their property. So they have two years after the date of sale to go back to the courts and redeem their rights to the house. The trick is—is that they are responsible for a 25% penalty for anything the new buyer has spent or paid on the house. So, for instance, we’re buying a house right now from an individual that sold at tax auction for $54,000. We’re helping her redeem the property so that we can buy it. But essentially we’re paying the person who bought it at the auction $67,000. So there’s a pretty hefty penalty. So it’s not common that the taxes are paid up afterwards and the property is redeemed. But it is possible. So—and because of that, you can’t get a clear title for two years after you purchase it. You can get title policy, but it will have an exception for the right of redemption. So it’s really important if you buy tax foreclosure sales that you realize that there is that right of redemption. It’s really good if you want to rent the property out and hold onto it until the two years expire. But you are committed to holding on to it.

Kevin Price

Okay. So you are—you know—potentially going to lose it though after two years?

Brian Spitz

Within two years. Before two years, it’s possible that you could lose it to the previous owner.

Kevin Price

But you could still profit from it. So you probably want one in fairly decent shape, so you’re not investing too much into something that you could lose.

Brian Spitz

Right. I mean, if you have—if you buy it for $50,000 and you have $100,000 in it, by the time you fix it up and pay insurance and everything. Then the old owner would have to pay you $125,000 to get it back. So you still make money, but if you’re long-term strategy is to buy and hold—especially if your strategy is to buy and flip, then you have to be really aware of what you’re getting into when you buy at the tax foreclosure sale. So people buy—

Kevin Price

It sounds really unlikely that they’re going to come up with the money.

Brian Spitz

It’s very unlikely, but it can happen.

Kevin Price

Un-hunh (affirmative).

Brian Spitz

The more important key thing there is that you can’t flip the property. You cannot bring in a new buyer for two years. Because the right of redemption has to expire before the title company will give title insurance, or a lender will write a new loan on the house.

Kevin Price

Brian Spitz is his name, always love having him on the program. He is with bigstatehomebuyers.com. That’s bigstatehomebuyers.com. Check him out, check him out often. Great stuff. Keeping you informed. I always like to look at the property section. I saw one today for $7,000. That’s just crazy. Thanks for being with us, Brian.

Brian Spitz

Thank you.

Kevin Price

All right. When we come back must more for you. We do want to remind you the best content here shows up down the hall, over at usdailyreview.com, while there, like it on Facebook, follow it on Twitter.