Due diligence in tax delinquent property investing is mandatory. Post 59

 

County to sell Glacier Motor Hotel to highest bidder

Glacier Reporter Cutbank, MT  By LeAnne Kavanagh  October 31, 2007

The Glacier County Commissioners and auctioneer Jerry Buckley are pretty confident it will take less than 30 minutes to auction off the old Glacier Motor Hotel

An auction flyer advertising the sale notes, “Auction will begin at 1 p.m. sharp and will take less than half an hour to complete, so be on time so you don’t miss your opportunity to bid on this well-located property.”

All real estate, motel and rental and all their contents and inventory will be sold in one lump unit to the highest bidder. There is no reserve or minimum bid on the property, which includes nearly six lots, which are all zoned for commercial use.

This is not the first time the county has put the property, which at one time served as the county courthouse and county jail, on the auction block.

Former owner Bill Powell purchased the Glacier Motor Inn from Glacier County in 2000. He opened a bar and restaurant, called Lucky Bill’s, which failed, and he later closed. During his five years of owning the property, Powell did not pay any taxes on the property.

The fair market value of the property, which includes Lots 4, 5, 6, 7 and 8 of block 6 and the northerly 8 feet of lot 9 of block 6, was originally listed at $222,638, but the Montana Department of Revenue agreed to reassess the value prior to a county tax deed sale in January 2006.

After the state’s reassessment, the value of the property dropped to $177,785for the May 18 tax deed sale.

Glacier County Commission Chairman Ray Salois conducted the walk through and, at that time, said the property was in horrible shape.

The county offered the propertyagain later at tax deed auctions on Aug. 14 and Sept. 7, 2006. The minimum bid at that time was the amount of delinquent taxes, penalty and interest, or $37,948.22. With no takers yet again, the commissioners further reduced the price of the property to 70 percent of that amount or $26,563.75-with no success.

The terms of the sale are cash, certified funds or bankable check, which is due on the day of the auction. County officials remind potential buyers the sale will be final.

The property and its contents will be sold “as-is, where-is with all or any faults.” The property will be conveyed to the new owner(s) by quitclaim deed with no taxes due for 2007 or prior years.

County officials urge all bidders to “verify all information and conditions of the real estate and title prior to bidding.” Powell had turned off water in the buildings but the pipes were not drained so much damage was done to the interior of the main building, they stated.

For full article:  http://www.goldentrianglenews.com/articles/2007/10/31/glacier_reporter/news/news6.txt

***************

Coach Mitch’s REFLECTIONS

Tax assessments have nothing to do with fair market value

Any town’s tax assessor will dispute this statement because the tax assessment is supposed to be at 100% of the current fair market value. But very often they aren’t.

The town council passes a budget. The tax collector then adjusts the tax rate, usually higher, to come up with as much of the needed monies as is politically possible. If the town has a savings account, it is determined how much will be used so as to keep the property tax increase as low as possible. Any amount still needed will be borrowed by offering bonds to investors.  How this  balancing act enfolds is based on the political situation in the town.

In this example, the hotel was assessed at $222,638. If this was an accurate number, why didn’t the owner pay the tax bill? Why didn’t someone buy the property for the measly sum of $26,563.75? Didn’t they think that all those commercial lots were worth it? I guess not!

People are not stupid

The main reason that people do not pay their taxes is because the owner does not think that the property is worth the amount of taxes due; mostly because the taxes are too high. The main reason that someone else doesn’t buy the property is that they are smart enough to see that the property is well over assessed and they do not want to buy a pig in a poke. People are not stupid!

Someone may buy that property. If they do, the town will require that they repair it, quickly and bring it up to code. I’m sure that the rehabilitation will cost a great deal. The town will see this as an opportunity to improve the town – and at the owner’s expense. For politicians, that is as good as it gets.

The condition of the property is a determining factor in a properties assessment. Why was the assessment so high if the property was in a dilapidated condition? You can be sure, that, as soon as the rehab is done, the tax assessor will inspect the property and increase the property assessment to reflect the upgraded condition.

Due diligence is necessary

Depending on economic conditions, about 1-2% of a town’s properties can go to tax deed auction in a given year. In tax deed states, perhaps 10% of a town’s properties are tax delinquent. The percentage of tax delinquent properties can be much higher in counties where TLC’s are offered. I have seen where 80% of the properties in the entire county have tax delinquent liens. With all these properties to choose from, why would an investor choose the hotel, with its absurd tax assessment?

As a real estate investor, you must be very careful and choose only those situations which make the most sense for you. It is very hard to lose money in real estate investing – if you do it correctly. One sure way to lose is to pay too much. A sure way to not pay too much is to only look at property that has the potential of being well priced. In my experience, the most consistently low prices will come from tax delinquent properties. Why look anywhere else?

More than any other system, Coach Mitch’s “Ridiculously Simple System…” locates the properties that are your prime targets. These are properties where the owner is in trouble. That is why they do not pay their taxes. I believe that this group is the most motivated of all motivated sellers. You can consistently offer 50 – 60% of the market value or less and be successful a high percentage of the time.

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

The rest is up to you.