How to Buy a House For Back Taxes, Dirt Cheap, Without Competition

So you’re looking for a smarter way to buy a property, either to live in, or to invest in. Congratulations. If you’re reading this article, it means you’ve leapt out of the “thinking” phase and into the “doing” phase, and most people never make it that far. There are many deals to be had, if you’re willing to do a little research.

You’ve probably heard that tax foreclosure property is a great investment, and you haven’t been led astray; but now, you’re going to learn how to buy a house for back taxes, dirt cheap, without dealing with the headache of competition. If you’re looking for a cheap property to buy for yourself to live in, stay tuned as well- this technique will work even better if you’re not an investor!

Right now, throw out everything you’ve heard or read about tax sales. If you’re smart, you’re going to figure out quickly that you can’t compete with all the big companies that will be clamoring to bid against you at the sale. Tax sale, be it for deeds or liens, is not a place for the savvy investor in today’s market. There’s a much better way for you to buy a house for back taxes: from the tax delinquent owner himself.

Most people overlook this strategy, which is why you’ll find next to no competition. If you’ve ever tried buying directly from an owner in mortgage foreclosure, then you understand why this is so widely unappealing to failed mortgage foreclosure investors. Frequently you can’t get these owners to return your call for the life of you– and if you do get a deal, then you have to deal with mortgage, the second mortgage, the back bills, the back taxes; but when you buy a house for back taxes, it’s a different animal.

Why?

Because these houses almost never have a mortgage!

That’s right. The mortgage company takes care of any tax problems to avoid losing their interest in the property. So you’ll find almost all these houses are free of a mortgage, or they wouldn’t be up for tax sale in the first place.

Another thing that might seem counter-intuitive is that the owners will almost always return your calls, and when they do, they’re eager to make a deal with you to sell to you, and for dirt cheap, just to get the property out of their name! This is because, as you’ll see, many owners of these properties aren’t people who are down on their luck, and are losing their homes. They’re people who inherited property, or absentee landlords, who have had it with this economy, and actually let the property go to tax sale on purpose, just to get rid of it.

This gold mine of owners can be hard to find, making them great prospects, and you’ll be pleasantly surprised to find how many of these owners are ready to hand over their deed for a couple hundred dollars to you, just because they’d rather see …

How to Finance Seemingly Un-Financeable Properties in Real Estate Investing

Some houses or multi-family properties in real estate can seem un-financeable. This could be for a number of reasons including the perspective buyers or title issues with the properties. Unfortunately, these problems seem to occur after an investor buys a property and then can’t sell it.

Let’s examine the usual reasons that properties cannot be financed and what can be done. The most common issue is likely that the appraisal on a property isn’t sufficient to cover the costs and expenses of a rehab. The investor often only finds this out after he has completed the rehab and has a ready and willing buyer who has to get a conventional bank loan to buy it.

On this same vein, the appraisal may come in but the buyer can’t get financing because of more stringent lender requirements – such as credit scores, time on a job, recent foreclosure history or bankruptcy to mention a few. It may not be as simple as going on to another buyer or just getting another appraisal, especially if this buyer had been declined by FHA in the first place as the investor’s property is “tainted” as to appraisal in the FHA system for at least six months.

The simplest solution to the credit issue and appraisal issues is to get private lenders or portfolio lenders to finance the sale. Private lenders are individuals who are willing to loan money that they would normally have in a bank earning a couple of percent interest. The investor should offer this individual a 10% interest-only loan secured by a first mortgage on a property with a two or three year balloon note. This private lender could also receive 2% to 5% as closing points on the loan and have a pre-payment penalty of three months interest.

The following is an example of what the private lender would get on a $100,000 mortgage: The buyer should be able to put down 20% of the purchase price to secure the mortgage in case of a market decline. A lot of current home buyers have large deposits because they went through foreclosure and haven’t paid mortgage payments for extended periods. 10% interest on $100,000 = $833.33 per month versus perhaps $83.33 in a local bank at a 1% interest on a savings account.

At closing, the lender would get cash of $3,000 to $5,000 as closing points. If the homeowner refinanced during the term of the loan and paid the pre-payment penalty, the private lender would additionally receive $833.33 x 3 months pre-payment penalty = $2,500.

The appraisal should be done by a reputable appraiser and a title policy and insurance should be provided to the private lender. An attorney should draft all the mortgage documents and do the actual closing to protect the investor/seller and the lender.

Using a private lender allows a buyer with blemished credit to purchase a home. It also allows the seller to not have to be dependent on the whims of a local or national …

What Happens When a Property is Sold For Back Taxes?

When a property owners fails to pay their property taxes, they are usually given an ample period of time to rectify the situation – at least a year in most cases, and often many years. If they fail to make arrangements to pay the taxes, the government will sell the deed to their property at tax sale (or a lien on the property, in tax lien states) to the highest bidder at tax sale.

The winning bidder must pay the full amount of their bid in cash at the tax sale, and then must wait out the redemption period before they can foreclose and apply for the deed. During the time, the owner may still pay the back taxes and penalties as well as the interest on the winning bidder’s investment and bail the property out of taxes. Once the redemption period expires, the owner loses the property permanently.

For investors, this is not a great way to buy property. You aren’t allowed to inspect properties before bidding on them, so you don’t quite know what you’re getting into. And on nicer properties, owners frequently pay off the deed or lien. Not to mention that the competition at tax sale is fierce, and you’re often competing against large companies that invest in tax sale properties full-time. There are few deals to be had any more at tax sale, and to profit from the property you’ve really got to buy it outside the auction.

The best way to get back tax property is to wait until close to the end of the redemption period and then see who still hasn’t paid off their taxes. This is the prime time to contact these people, as they need to sell to keep from losing everything to the government. These owners are often ready to sign over the deed just to be done with the foreclosure and move on.

Also, by this time you can be fairly certain that the properties left are free and clear. Mortgage companies step in and pay off delinquent taxes to redeem properties (usually before the sale), and properties that make it that far are almost always mortgage free.

All this adds up to property that is almost guaranteed to have built-in profit at the time you buy – especially if you can grab the deeds for a few hundred dollars from owners that were going to let the property go anyway.…

Non Performing Loans Vs REO Bank Owned Property – How Do They Differ?

To make real estate investing work for you, you must always take into consideration economic conditions that dictate which type of real estate investment is the best choice at any given time. Do you know your basics? What are Bank Owned REO Properties or non performing loans? What is the difference between the two? It is quite simple really.

Both non-performing loans and Bank Owned REO Properties are the unfortunate children of economic fall down. As economic crisis takes swing so does losing homes as struggling homeowners cannot keep up with loans and mortgages.

An adaptation of the well know children rhyme “First comes a non performing loan then a foreclosure” does well to illustrate the progression of distressed property handling and the major difference between the two concepts. Whereas they undoubtedly trod the same road, the difference in how far along the road each is.

Say a homeowner cannot afford to pay a loan anymore. First month the bank lets it slide. The second month, they mail the letter. The third the gavel comes down – the property has been declared a non-performing loan. For all intents and purposes non-performing real estate loan is a property loan that has defaulted or is in danger of defaulting when homeowner cannot make payments any longer. With some exceptions, three months is all a homeowner has to turn over the dough before his loan is declared non-performing. And current economic conditions being as they are, non-performing loans are sprouting like mushrooms after rain. Financial corporations specializing in non performing loans will help with purchasing a loan that best fits individual financial portfolios. By liquidating involved assets they can realistically provide a good value. But not a 50% discounted price. Not with complementary property repairs. Not bulk. And certainly not without tons of paperwork and fees. None of the things Banks Owned REO can and will do to move the sale along.

Bank owned REO property, on the other hand, is the next step in the distressed property timeline. No payment on a property loan will sooner or later result in “walking the plank”, in other words the dreaded foreclosure. Foreclosure unceremoniously plunks down distressed property to the auction table. Properties that cannot be auctioned off it end up as Bank Owned REO Properties. With current economy banks have a veritable tsunami of real estate properties coming their way. Wildly scrambling to regains at least some money and clear the books, banks sell Bank Owned REO Properties like tomatoes on local market, at a discount, liens and other expenses on the home removed.

While both are viable options for a real estate investor, everyone wants to buy where a deal is better. And in real estate, affordable, bulk, plenty and flexible of Bank Owned REO is a far better than a sometimes, costly, and rigamarole non-performing loan.

And who wouldn’t go for a deal that will brings maximum profit on a minimum investment, fast.…

History of the 1031 Tax-Deferred Exchange in Real Estate

What is the history of the 1031 tax-deferred exchange? Some investors know that the exchange is a strategy long used by real estate investors. An investor sells investment property and buys or acquires “like-kind” property following the regulations and stipulations of Section 1031 in the Internal Revenue Code (IRC) to defer federal tax, capital gain, and depreciation recapture taxes. “Like-kind” is defined as any type of real estate. You can sell a retail center and buy an apartment building or land in a 1031 exchange; you can sell an office building and buy an industrial building or hotel.

Note: the 1031 tax-deferred exchange is often known as a deferred exchange, a “like-kind” exchange, a Starker exchange (you will see why later in this article), or it is often simply known “a 1031”. No matter what it is called, investors can defer the tax by reinvesting into another investment property if they follow the strict rules. It is one of the tax benefits of investment real estate ownership.

So how did this all come about – what is the history of the tax-deferred exchange?

The tax-deferred exchange actually has a rather long and complicated history dating back to 1921. The first income tax code was adopted in 1918 as part of The Revenue Act of 1918, but it did not provide for any type of tax-deferred exchange. The first tax-deferred exchange was authorized as part of The Revenue Act of 1921 when the United States Congress created Section 2021 of the Internal Revenue Code. Between 1921 and 1970, exchanges were always simultaneous swaps between two parties, by the way.

In 1928, the section number in the Code was changed from 2021 to Section 112(b)(1) with the passage of The Revenue Act of 1928. The 1954 amendment of the Tax Code changed it again, this time to Section 1031 of the Internal Revenue Code, and much of our present language and procedural details were adopted at that time.

However, we can thank the Starker family for the rise of the “deferred exchange”, the way a majority of exchanges are handled today (as opposed to simultaneous swaps). In 1979, a taxpayer named T.J. Starker, transferred timber property (which was free and clear of debt) to Crown Zellerback Corporation in exchange for a promise by Crown to transfer to him like-kind property chosen during a five-year period. At the end of this five-year period, Mr. Starker would receive any outstanding balance in cash. A trust agreement was formed so that all sale proceeds were held in a separate bank account, and clear terms of the trust stated that the funds could only be used to purchase replacement property for the Starker family, and for no other purpose. In fact neither Crown nor Starker even had access to the money except for buying replacement investments. The IRS, upon seeing the arrangement, denier the tax deferral arguing that a 1031 mean a simultaneous swap, which was how the IRS interpreted the code to this time. In …

Loan Modification Vs Loss Mitigation Vs Short Sell Vs Refinance Vs Bankruptcy

I’ll start by explaining the difference between loan modification vs loss mitigation leads. Loan mod is when you renegotiate the terms of your mortgage by modifying the payments owed to the lender. The new terms are based on your ability or inability we should say, to pay your monthly mortgage payments. This can be done by just attaching any past due balances to the loan itself, reducing the interest rate of the mortgage or extending the term of the loan.

What’s the Difference Between Short Sell and Mortgage Modification?

Mortgage mitigation also will result in an entire new contract between the homeowner and the lender however, the favor can be shifted more toward the homeowner. The reason for this is that most times the payments are made more affordable by actually lowering the amount owed or lowering the balance as most would call it, on the property itself. In my position at The Lead Tree, I actually see many loss mitigation leads turn into deals that have shaved ten of thousands off the balance of the loan or in some cases where the homeowner doesn’t wish to keep the property, a short sell can then be made where the bank will take the property for a fraction of the balance owed and some times a short refinance is used to keep the family in the house.

In my opinion, legal mitigation is a wiser option for homeowner than loan modification because it was the homeowners who were tricked into borrowing more from the bank quite simply because the banks were accepting falsified and inflated appraisals just to try to increase profits. As a seasoned mortgage professional I watched it happening everyday. In turn it contributed to the housing crisis which then contributed to the recession. Loss Mitigation puts the blame on the bank and is a way to get the lenders to recognize their wrongdoing in the mortgage meltdown.

Loan Modification vs Bankruptcy

Loan mod vs bankruptcy shouldn’t have to be an option. It’s almost always going to be better off if you can get the lender to take some of the heat off first and use bankruptcy as a last resort.

Please visit The Lead Tree online for Mortgage Lead Generation with 100% qualified and exclusive leads, live transfers as well as appointment setting.…

How Important Are Home Warranties?

Buying a home is very exhilarating with highs and lows throughout the process. Young families purchasing their first home may see several homes before deciding. Older couples who are looking to downsize look to the fond memories of the happy moments with their children as they get ready to sell. Everyone has different needs and the last thing anyone wants are concerns about the systems of a home, whether you are the buyer or the seller.

 

How seriously should you consider a home warranty? Is it just another way to get more money out of you? For the seller it might not be that important. It does make for a good incentive for potential buyers to look at your home. The sellers may want to cover older appliances, plumbing and roofing systems. If they are aged they could present a problem for new home owners. Discuss this with a real estate professional. You might not offer it in the beginning but use it as a bargaining chip to sweeten the deal if it is needed.

 

When it comes to buyers the home warranty means peace of mind. It is good insurance for your greatest investment. The costs are very low compared to repair bills of a home’s systems. If in the first year you have an appliance go out the home warranty company will repair the problem or completely replace it. This could put a crunch on your money if this problem happens just after buying the home. You will likely invest thousands of dollars in closing costs, moving costs and some upgrades in the home. Repair issues could really hurt your wallet.

 

One experience I had was at a home for sale where our client had already moved out of town and the home was vacant. I came in one hot August Sunday afternoon to hold an open house and it was over a hundred degrees inside. I could hear the unit running but when I looked at the outside exhaust fan it was not turning and was making a loud squealing noise, almost deafening. I turned the unit off for about a half hour. I turned it on again thinking the unit might have frozen over or something like that. It did work when I turned it on. However, it only worked for about twenty minutes, and then stopped again. This condition is a killer to buyers. The hottest days of the year and the HVAC is not functioning. Luckily the owners had purchased a home warranty and it took care of the problem within a couple of days.

 

For real estate professionals, we understand the importance of a home warranty. We understand that with a buyer if there are problems in the first couple of months everyone gets blamed. The seller obviously knew it was a problem, right? The seller and their agent covered it up. I have heard it all. This also can reflect on the buyer’s agent as well.

A home …

What Factors Affect Home Resale Value? Simple Home Improvements To Increase Your Home’s Value

It’s never too early to start thinking about selling your home, and many real estate experts say that the best time to start is before you even buy it. If you’re buying a new home, chances are you’re going to be selling it in five, ten, or twenty years from now. While reselling may be far from the top of your priority list, there are a few interesting facts to keep in mind. Some attractive features of your new home might turn out to be investments that don’t pay off when it comes time to sell, while other features that you overlook now could have a positive effect on your home’s value over time.

When looking for a new home, your top priority should still be your own needs and desires, but it can’t hurt to have “resale value” in the back of your mind. After all, a home is a huge purchase, and it can turn out to be a great investment.

All features of a home will essentially be built into the price. If you do your best to learn about the true value of these features, especially their effects on the value over many years, you will have a better idea of how much you should be paying initially.

Features that add to your home resale value

Good location

Real estate experts agree that a good location is the biggest factor in adding value to a home. The home should be in a growing community; close to freeways and commercial areas, but not so close that the neighborhood is too noisy or congested. It’s also a good idea to check city records for any proposed land use action that will affect the area. The neighborhood may look peaceful now, but the city could be planning on tearing down the green space to build a new freeway. Planned city action could drastically change the value of the house over time, positively or negatively.

Large kitchen

The kitchen is one of the most important rooms in the house. It’s a central location for gatherings, and it’s a room in which you spend a great deal of time. Large kitchens that are open, accessible, and adjacent to dining and family rooms will add substantially to your home resale value.

Three or four Bedrooms

Bedrooms provide room to spread out, secluded workspaces, or extra space for a growing family. As far as the home resale value is concerned, three or four bedrooms is ideal. If the house has five or more bedrooms, make sure they’re not inflating the price too much. You shouldn’t be paying much extra for more rooms, as they won’t add significantly to the resale value. Also, if the home has less than three rooms, your pool of buyers will be limited and you could have a harder time selling in the future.

2.5 Bathrooms

One bathroom in the master bedroom, one shared bathroom, and a half bathroom for guests is ideal. If the house has more than …

TRID Regulations and Hard Money Lenders

Here’s for hard money lenders…

TRID regulations are going to have a mixed impact on your investing.

What is the TRID?

The TILA-RESPA Integrated Disclosure Rule, also known as the “Know before You Owe” regulations, are excellent for consumers but, unfortunately, slightly more laborious for you. Hopefully, you are successful enough to transact an enviable amount of loans each year, but new government/ consumer protection regulations stipulate that any hard money lender (or private money lender for that matter) who transacts five or more loans a year will need to include all details of their commercial and residential transactions in their forms. And these accounts have to be as transparent and thorough as possible. In other words, the end result is (or, rather has to be) a real-estate deal that provides clarity of dealing to your client and – at least until you get used to this – far more work for you.

Until now…

As you likely know, until now private lenders simply required minor documentation such as a Note and a Deed of Trust. Other forms varied but usually included some form of promise from the borrower (usually included in the promissory note); proof of financial statements such as tax returns and proof of income (though no way as intensive as that required by traditional lending institutions); and assurance that the property was worth investor’s while to fund. It was somewhat like a business deal. The proof of evidence lay largely on the borrower; he sought to persuade the lender to invest in his property.

Things have changed…

Since October 1st 2015, all residential real estate transaction requires that the lender outline his shenanigans to the client. If you’re a hard money lender, you may have to mail the client two new forms: the Loan Estimate and the Closing Disclosure (a statement of final loan terms and closing costs). Your client has to receive these forms within a certain time, and you and client can only sign off on loan once the client understands and is satisfied with your calculations of repayment that include interest rates, loan-to-value ratio, and all involved terms and schedules.

Details of the New Documents

The Loan Estimate form uses simple language to summarize the Good Faith Estimate (GFE) and the Truth in Lending Disclosure sections for the client and it explains the loan’s key features, costs and risks.

The Closing Disclosure form summarizes the final Truth-In-Lending statement and the HUD-1 settlement statement, again using language that makes it easy for your client to understand. It provides him with a detailed account of your transaction, including your projected monthly payments, fees, balloon payment, interest rates, and other costs.

You are responsible for preparing the Closing Disclosure (although you may hire a settlement agent to do this if you want, as long as the agent is compliant with the Final Rule’s requirements for the Closing Disclosure). What this form contains is some additional new disclosures that are required by the Dodd-Frank Act as well as …

The Millennial Commune Movement Explained

There’s a new model of living that is gaining popularity among Millennials. Millennial communes are sprouting in major cities across the United States. It seems that our generation is reluctant to buy and own homes. But instead, Millennials are turning into services that provide them access to a living space.

This phenomenon is not just seen in real estate. I see it every day. People of my generation rely more on a sharing economy to gain access to cars, music, and other items. Most of my generation also finds it normal to continue living in their parents’ home. A lot of them also postpone marrying. These factors contribute to their attitude towards ownership, which lead to the rise of the sharing economy.

And if Millennials do decide to move out of their parents’ homes, they choose to live with others like them. There are several factors why they opt to live in co-living spaces or communes. These include the rising prices of rent and the Millennials’ yearning for real connection. There are more 25 to 34 year olds today who live with others than any other generations. Maybe Friends the TV series had something to do with this one. That, or they just find rental prices too steep, and wage have remained at their current state.

So, what is a Millennial Commune exactly?

A Millennial commune allows an individual to share a living space and do activities with like-minded people for a fixed price. Applying to live in a commune feels like you are also signing up for a dating service. Well, commune managers just want to make sure that a potential resident can adapt with the other people renting at the co-living space.

Millennial communes allow people to live with roommates in a place that provide them with various amenities, and at the same time allow them to save money. Studies have shown that people in co-working spaces are less lonely and happier. This is also the same with co-living spaces, which offer both private and social space.

Each room is private and comes with its own locks. The rents are paid month-to-month, and you can opt out any time you want. The rent includes the use of the common space furniture, common space cleanup, kitchen supplies, and other amenities.

While a room in New York might cost between $1,600 and $4,000 a month, there are other co-living spaces that are more affordable than that. In Syracuse, there are units that cost around $700 to $900 a month. The location and room size can greatly affect the rent price.

Millennial commons offer flexible rental agreements. They target workaholics and entrepreneurs. There are co-living spaces that have been designed to facilitate productivity and foster collaboration. While it is not recommended for people wanting to raise a family, it is definitely perfect for people who are out there chasing their dreams.…