Mitch Goldstein | Coach Mitch | August 13th, 2008Coach Mitch’s REFLECTIONS
Gurus are getting it wrong
I don’t know why it is but all too many Gurus’ are not using the basic tax delinquent terms correctly. When examining their complete statement, I know that they “get it,” the theory, however very often the terminology is being wrongly used. Incorrect usage of terms leads to confusion on the part of readers, including me.
It’s a problem for all
At the least, we must read the offending sentence at least twice. At the worst, we have to wonder if anything the writer says can be trusted.
I do not like that I must read the questionable statement more than once, but let’s be fair, it’s not the end of the world. However, I do dislike having the feeling that I must question all of the writer’s remarks. If the correct terms are not being used in one part of the thought, why should I be confident that the other remarks are well grounded? All is put into question.
I really resent it
The lack of preciseness in the writing, the question of not being able to count on the statements, the feeling of helplessness, all serve to waste my time, distract me from the writers message, and dissipate my energy. The worst is that I don’t have any energy to spare.
Does it matter?
Sure, it matters. What if Einstein’s famous equation was constantly being misquoted by physicists? If the physicist was saying E = mc4 instead of E = mc2 then what would you think?
Wouldn’t you call into question everything that the physicist says? What if this physicist was on a governmental board that was promoting something special? Would you have complete confidence that the physicist knew what he was doing? Would you have any lingering doubts? Of course you would, and your lack of inspiration for the project might be justified.
An example
I recently read a post by a sophisticated blogger. He definitely knows the theory of tax delinquent property investing. However, IMHO, there are statements which I must call into question. I hope that you see the glaring errors of fact and incorrect interpretation below.
The guru: “…As homes go through foreclosure and repossession, the homes are sold at Property tax lien auctions to the person with the highest bid so that the mortgage companies can get back their losses. …Over the next ten years according to some authorities, more than 35% of homes for sale will be purchased at Property tax lien auctions. …”
The problems:
1. There is no such type of auction as a Property Tax Lien Auction. It does not exist. It is an oxymoron; like CIA and Intelligence, because of its failure to uncover 911.
Even if Property Tax Lien Auction were to be the vernacular used by many, it is not proper. It is not even a term of art. It would not be listed in any dictionary of real estate terminology. It’s just wrong.
2. The proper term to be used in this instance is Foreclosure Auction.
3. The rational for having the auction is misleading.
4. It is NOT the purpose of the auction to allow the mortgage company to “get back their losses.” The mortgage banking industry maintains that it loses money when doing a foreclosure. Rather, the foreclosure auction allows a mortgage company to recover control of the collateral so that it can mitigate further losses, which is their legal and financial obligation.
5. To mitigate a loss, i.e. to cut or reduce a loss, is quite different than “get back their losses.” e.g. to recover a loss.
So what’s the problem?
Some may say, “So what. I understand what he’s saying.” I do also. However, I would like to see more precise thoughts, and that would lead to more precise language. After all, these are supposed to be instructional blogs.
Would you want your surgeon to follow an instruction manual that was precise or one where the language was confusing?
If you were having heart surgery, which surgical instruction would make you more comfortable: “Make no more than a 4mm cut of the Pulmonary artery so as not to cut through to the Aorta or the abutting Pulmonary veins;” OR “Be careful cutting this artery because another artery and vein are nearby?”
I’m sure the point is made but here’s another example
The Guru says:… “Over the next ten years according to some authorities, more than 35% of homes for sale will be purchased at Property tax lien auctions. ”
6. This idea is widely incorrect, in several ways.
The writer continues to use the term, Property tax lien auctions, incorrectly. Worse, it is being used in the wrong context.
Each year, only a maximum of 2% of the tax delinquent property stock ever goes to Tax Deed Auction. Of these, only about 1/3 are housing stock. The rest are raw land or commercial properties. The numbers don’t add up. Even if this article were writing accurately about tax delinquent property, 10% of national housing sales are more homes than are sold at all Tax Deed Auctions.
7. I believe the writer actually means to say that, because of the high bank foreclosure rate, authorities predict that over the next 10 years, as much as 35% of the housing stock could be purchased at Foreclosure Auctions. This would be an accurate portrayal of what might possibly happen.
Currently, in some counties, as much as 90% of the MLS SALES are properties that banks have taken back and listed for sale.
As one reads the rest of the post it is quite clear that Foreclosure Auctions are the proper subject, not Property Tax Lien Auctions.
Most importantly
8. It should be obvious to anyone familiar with tax liens that the word “property” is not associated with tax liens, except as collateral. There is no such thing as a tax lien property auction. Tax Lien Certificates are auctioned off at public tax lien auctions. If a TLC was not sold at auction, then some counties sell TLC’s Over-The-Counter after the auction.
The ownership of the property is garnered via a tax lien foreclosure. The administrative or judicial procedures vary widely from state to state. In some areas, a TLC holder can simply request a deed be issued and, in at least one state, the tax lien certificate holder must first foreclose the lien, then put up the property for public auction, and bid against others.
That anyone, much less a tax lien Guru, should speak in such imprecise terms is disquieting.
Do you think I’m kidding?
This is typical of the type of question seen in the forums.
9. Ques: “Can you rent a property out that you received from a tax lien sale that is still in it’s redemption period?”
Please – tell me that you see the problem. If you don’t then you have some studying to do.
You cannot “get” a property from a tax lien sale. Therefore, you cannot rent out what you did not “get.”
This person probably meant that they “got” the property at a tax deed sale and the redemption period is still in effect, e.g. Texas with a six month to two year redemption period. BTW, yes, in Texas, you can rent out the property, because you own the property, and in Texas, you can even repair the property and add the repair cost to the amount owed. See how important it is to know the law?
Back to reality
Coach Mitch’s “Ridiculously Simple System…” explains Tax Delinquent Real Estate in terms that are simple, easy, and accurate.
Let’s be clear
One of the reasons I don’t like dealing with the tax auction process is that there is so much ‘noise” to contend with. This includes newbie’s who, not knowing any better, make investing decisions based on inaccurate information, causing difficulties for more experienced investors.
It is much easier to deal with folks prior to the tax sale. You gain many benefits. The best one – no competition.
See Coach Mitch’s “Ridiculously Simple System…” for details.
Read and listen carefully – then act wisely,
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