Tax delinquent property tax liens are 1st in line. Post 66

 

Bangor Savings Bank forecloses on Ford dealership

The Ellsworth American December 20, 2007  by Jennifer Osborn

ELLSWORTH, MAINE:  Bangor Savings Bank filed a six-count complaint in Ellsworth District Court Dec. 7 alleging that Dave Gould has failed to honor three notes totaling nearly $1.7 million.

The bank also requests that the court determine the priority of other parties that have placed liens on the property and issue a judgment of foreclosure and sale.

Others have filed liens on Dave Gould Ford.

Maine Revenue Services has filed a state tax lien on Dave Gould Ford alleging the auto dealer owes $81,015.10 in unpaid sales taxes, interest and penalties.

The Ellsworth American has filed a lien totaling $24,352.71 on the Route 1 property. The lien claims unpaid advertising.

Ellsworth attorneys James E. Patterson and Diane S. O’Connell have filed a lien on behalf of Harmon Tire on High Street for $10,367.94. The lien claims unpaid tires and service between Feb. 26 and July 13.

These actions follow a $19,016.34 lien filed by a customer of the dealership, Karen Robidoux of Ellsworth, who alleges Dave Gould Ford failed to pay off the loan on a vehicle she traded to him.

A complaint that Ford Motor Credit filed in Ellsworth District Court alleges that Gould owes the company $2.4 million.

The Maine Department of Professional and Financial Regulation has taken 20 complaints about Dave Gould Ford alleging complaints similar to Karen Robidoux’s.

See full article: http://ellsworthmaine.com/site/index.php?option=com_content&task=view&id=11891&Itemid=1

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Coach Mitch’s REFLECTIONS

Is lien positioning important?

Is it important to have a superior lien position to another lien?

If you read the article, you saw just how many liens are recorded against this property.

This article only speaks to the recorded liens. There could be other, non-recorded liens against this property in existence.

A lien does not have to be recorded in order for it to be a valid contract. Therefore, a lien could have been contracted prior to all the other recorded liens. However, law, in every state, mandates that recorded liens take precedence over and are superior to any non-recorded lien.

In fact, no one will know about the unrecorded lien unless it is recorded.  Recording something informs the world that it exists; that is the purpose of recording.

The order in which liens are placed is based on the exact moment in time that the lien was recorded; the earlier the time, the higher the placement. The first lien recorded is the most superior, etc.

The only exception

Property tax liens are the exception to the rule. Property tax liens always are placed in first position, ahead of all other existing liens. Because of this rule, it is true to say – property tax liens are the most secure liens.

Add it up

Add up the amounts of all the outstanding recorded liens, subtract the potential market value of the property, which acts as the collateral, and you will see just how out of balance this debtor is.

Frankly, usually the Fair Market Value is not the right number to use, excepting that this is the number that we know. We do not know exactly how out of balance the debtor really is until the property actually sells and money changes hands.

Recorded liens

Property tax lien = $ ? – it is usually included within the mortgage payment and it’s often not paid if the mortgage is not being paid

Bank mortgages = $981,353 + $300,000 + $88,000

State sales tax = $81,015 – don’t confuse this with property taxes

sales taxes are against personal property sold (merchandise) not real property

Mechanics liens = $24,353 + $10,368

Customer Judgments = $19,016 plus 20 more of similar amount, about $380,000

Ford Floor Plan loans = $2,400,000 – typically collateralized against the cars, not the property

Total amount owed= $4,284,105

Less collateral= $1,525,000 if full FMV is collected (not typical)

Uncollateralized amount owed = $2,759,105

If you wish to be paid, you can appreciate why lien positioning is crucial.

A property tax lien is the lien first in line, before any other type of lien.

The government always makes sure that it is first in line.They always water at the trough, they always eat first, and they always are the big dog, taking the big bite.

The government will be made whole

In this case, the only entity that will be fully paid is the holder of the tax lien. There is probably not enough collateral to fully cover the outstanding mortgages. There is definitely not enough collateral to pay off the other outstanding liens.

All the other liens will be stripped away when the property goes through a bank foreclosure.

Learn this lesson well

If you were to purchase notes at a discount, in this case, you would probably not be paid. If you were to purchase liens at a discount, in this case, you would probably not be paid. The only investor who would definitely be made whole will be the tax lien certificate holder.

I do not take chances. I only bet on sure things. This is a good example of why I stay with tax delinquent property investments.

Coach Mitch’s “Ridiculously Simple System…”would identify this property as tax delinquent. If your goal was to collect a significant interest, then, according to Coach Mitch’s “Ridiculously Simple System…”, this property would be an ideal candidate because you know that the bank will almost certainly pay off the delinquent taxes plus the interest to you because the bank wants to foreclose and recover its collateral so that it can recover some of its debt.

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

Happy New Year