Due diligence – do it or be sorry you didn’t. Post 164

Coach Mitch’s REFLECTIONS

Haste Makes Waste

I am increasingly worried about the lack of due diligence amongst wanna-be real estate investors. One of the more misinterpreted guru sayings is, “You can’t steal a deal if you’re moving in slow motion.” Well sometimes if you move too fast, it is you who is bamboozled.

The voice of experience

I read a blog by an experienced tax lien investor. This person has done many tax liens over the years in several states and has a good grasp as to what it takes to be safe and profitable. He offers the following advice which I fully support.

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Been doing tax sales since 1986 and there are a lot of pitfalls, mostly overlooked by newbies and gurus.  Some properties that have sold at tax sale:

1. Army bombing range
2. land under railroad tracks
3. land at bottom of man-made lake
4. land at bottom of river
5. land with 30 year pre-paid lease
ATT had a small building and leased the land for 30 years and paid the rent in one lump sum in advance. The owner didn’t see any future in it and stopped paying the taxes and it was sold at tax sale. A new owner is not obligated to pay the taxes for the next 30 years but can not collect any rent for the next 30 years.
6. house with no back wall
7. landfill
8. toxic waste site – was a superfund site
9. quarry filled in with trash including chemicals
10. abandoned gas station with leaking underground storage tank. A LUST law violation.[ed.]
11. site with active environmental lawsuit
12. no land just an expired lease on a demolished building
13. cabin on leased land – cabin was totally destroyed in 1972 flood, lease expired in 1973, sale was in 1995.
14. side of cliff – 50 foot vertical drop
15. landlocked parcels
16. residual from road eminent domain 2 feet wide (you can’t meet zoning setback requirements)
17. residual from interstate construction with no right of way off limited access highway.
18. forest land – just had been clear cut of timber.
19. land zoned as unbuildable
20. land in flood plain
21. land in wetlands
22. land with endangered species
23. mobile home on rented land totally destroyed by fire
24. house suspiciously burn by arson 2 days before tax sale.
25. building with long list of code violations
26. building condemned and under demolition order from municipality
at one sale the codes person passed out a list of 22 houses on the sale list, all of which were on the city demo list. He forewarned bidders. He didn’t have to do that.
27. land too small to build on,
doesn’t meet current codes or setbacks. saw a lot that formerly had a small row house. the lot was only 10 feet wide, so the house must have been only 8 ft wide on the inside. unfortunately the current side set backs were 10 feet on EACH side.
28. land in subdivision where roads were never constructed, and never dedicated.
29. land that won’t or didn’t pass the perk test.
30. land with unrecorded deeds. saw one that had 6 unrecorded deeds in a row.
31. land with title problems.
saw one where the last recorded owner died in 1919 and there was no will or deed after that. two attorneys, one for a buyer and one for the “seller” both concluded that there was nothing that you could do to clear the title.
32. land with boundary dispute, or encroachment.
saw 100 ft wide lot that had a 60 ft encroachment on one side.
33. properties that don’t exist, mapping errors, overlay from the adjoining map, two title chains, etc. etc. etc.
34. properties sold on unrecorded contract for deeds.
saw one where it was sold twice. tax bills going to owner of record, who owned the property 2 owners back. he wasn’t getting paid, didn’t want to bother with sheriff sale and was not paying the taxes. there were then 3 successive owners who had title interest in the property. no indication of these contract for deeds in the public records.
35. I could go on, but my 1 typing finger is getting tired.
36. many of the properties are problem properties that the sellers could sell on the open market particularly with disclosure laws. many of the properties are worthless, some have negative value.

It’s a jungle out there, buyer beware, and make sure that you ALWAYS do your research, due diligence and always see the property before bidding. Often times viewing the property makes its flaws obvious.

Bill

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I will add some of the situations that I’ve seen and some that others have offered.

37. There are always properties at auction with bad addresses or bad Tax ID’s – Be sure to triple check all numbers and validate that you are paying for the property that you want to buy.
38. Graveyard – if you want to develop it what are you going to do with the current occupants?
39. Meridian in a road
40. Land under bridge – maybe it’s good for a lemonade stand.
41, Land with underground utility pipes – the land can’t be built upon in case the pipes need to be worked on.  A lady paid $1000 for it.  Thrown away money.
42. Land with houses that had been demolished – Google Earth pictures are at least one year old
43. Properties that don’t exist
44. Condemned burnt out shells
45. Farmhouse burnt to ground just before the sale
46. Expired land lease
47. House destroyed years earlier and on rented land
48. Super Fund site
49. Former auto body paint shop
50. Former meth lab
51. Former dry cleaning plant
52. Former steel mill
53. Property seized by ATF
54. Landlocked property in area with law forbidding building on any property that did not have public road frontage.
55. Property under a creek – mineral rights
56. Property under an active railroad track

I can only imagine some of the war stories attached to these properties.

In every one of those cases the tax sale buyer probably had a hard time making a profit.

I know that these examples can give a good laugh, however, if you were the recipient of a worthless property at a tax sale, I guarantee that you won’t think it is funny to see your cash go up in smoke.

IMHO, only properties that can provide a reasonable chance for profit should be offered at a tax sale.

I hope that you now have a better idea why I think that government charging high taxes is forcing good people into a bad situation, and that the government selling worthless property at tax sales are today’s version of cruel and unusual punishment. Taking someone’s property because the taxes are late is legal overreach; the punishment does not fit the crime.

See Coach Mitch’s “Ridiculously Simple System…” ™ for details.

Cordially,

BADCODE-439-6100 until midnight EST
www.CoachMitch.com