This week I had two individual's e-mail me on two previous tax lien articles I published a few weeks back on “How to invest in Nebraska Tax Liens – part 1” and “How to invest in Nebraska Tax Liens – part 2“. With the Nebraska Tax Lien sales coming up in a week I thought it might be helpful to answer these questions (which others might have similar type questions) and provide you a little info on the 2012 Douglas County Tax Lien Sale. So let's get started…
“NE awards the bid to the bidder with the smallest ownership portion bid. Do you ever bid less than 100%?”
- No I haven't. Typically when I bid I only bid on liens with 100% ownership. I couldn't assume the risk of owning less than 100%.
“What legal implications are involved when you don’t own the whole portion?”
- I personally can't attest to the legal implications, because I couldn't assume any risk less than 100%. However, when I bid in the 2011 Online Douglas County Tax Lien Sale I noticed that most banks or large investment firms were the ones that were assuming less than 100% risk (most often 0% ownership). First off because they could assume the risk, and because of the lawyers they more than likely have helping them. I would HIGHLY recommend contacting a lawyer prior to buying liens with less than 100% ownership.
“What happens if you buy a tax lien but fail to pay subsequent taxes (assuming the homeowner continues to be in default). Do you have any right to foreclose after owning just 1 year of liens?”
- To answer the first question, if you fail to pay the subsequent taxes on the property, then the following year those liens go up for auction too. Thus if they are bid on and another lien holder also has a lien on the property, then if the owner hasn't paid it back within 3 years of when you bought the initial lien, then you and the subsequent lien holder have to divide the property according to the proportion each of you have lien ownership. So say you pay the first year, and the other lien holder pays year 2 & 3, then you have 33% of the lien rights, and 67% for the other lien holder. Either way it can be a messy situation and more difficult to manage when you have multiple lien holders involved. If you have an excellent money making opportunity with the property, then PAY THE SUBSEQUENT TAXES! You'd be throwing away 14% interest by not paying the subsequent years!
“What would your rough estimates be for hiring a lawyer to do the final foreclosure process? Want to make sure I am including that in my investment analysis.”
- When I started for closing on a property in Sioux City, IA in 2010 it costed about $125 to obtain the county documentation on who else has liens on the property. That didn't include lawyers fees either, so I'd estimate the lawyer fees would be varying depending on the $$$ amount of the lien and how many other lien holders are involved in the property. At a minimum I'd estimate at least $400 for foreclosure costs, and more when the lien is more expensive. (**Reminder – at most lien sales investors don't invest in liens that are less than $400 for the initial amount because of the foreclosure costs that might be involved someday)
“How can I tell if there are back taxes on the property I am looking to purchase (that other investors passed on in previous years)”
- To my knowledge there is one of two ways. 1) The county assessor website will always show this in each properties records. 2) There will be a special field (column) on the excel spreadsheet you are given prior to the bid that will indicate multiple years. My recommendation prior to bidding would be to sort the excel sheet by this column, and highlight them in “RED” or put a NO over them.
Where can I find out more info the Nebraska Douglas County Tax Lien Sale
Nebraska State Statues
Good luck and again if you have any further questions, then feel free to e-mail me at firstname.lastname@example.org. Thanks again for the great questions!
That clears some things up. Thanks for the valuable information.
Based on the information you gave me, my assumption would be that this might be a new property and the taxes owed on it are for just the lot taxes. I had boughten a similiar type tax lien in 2008 where the face value was $650, but when I looked on the assessor website (post tax lien sale) it had a $210,000 valued house on it. It was because it’s previous years owed taxes was just on the lot.
The other idea is it might be 1/2 the back owed taxes or a portion of the overall owed taxes. Some people don’t have their taxes escrowed, so not everyone pays 1/2 their tax payments every six months. Some people only pay what they can afford and that might be the reason.
Either way look at the assessor website. Most of this information will be there in the details.
Does that answer your question?
I had a quick question as I’m trying to teach myself about tax lien sales here in Nebraska. My first time around I only want to look at certificates with face value between $500 to $1000, so I don’t get in over my head. I’m curious why a certificate with face value of $536 would for a residential property with a total value of over $120k? Know the area and the annual tax due would be at least $2,000; why would the tax certificate be in the amount of the $530 dollar range? I just wanted to make sure I’m not missing a key piece of information or something I should be looking for.
Any guidance you can provide would be great.