Posts

Essential Information About Tax Sales.

JohnMenszer2-Exposure-1000931Lately, I am getting a lot of calls about tax sales. It is no coincidence that CivicSource recently conducted a property tax auction in Orleans Parish. Tax sales involve a lot of moving parts and unfortunately they don’t all work together. Let’s look further into this.

After the tax sale while you are waiting for the three year redemption period to run you are going to have to protect your investment by paying each subsequent year’s taxes.

However, if the property has housing violations you as the tax sale purchaser may receive notices from New Orleans Code Enforcement about a hearing.  If you do not remediate these issues the property may be burdened with fines and penalties.  Even worse, the City will not accept your payment of subsequent year’s taxes without payment of the Code Enforcement lien. This is horribly unfair – to expect a non-owner to fix up a property – but it is how the City operates.

There are two roads to reward with a tax sale.  If the owners redeem the property within the three year redemption period you make a nice return.  Your investment back, plus 5% penalty and 1% per month interest.  Twelve (12%) interest is not bad in this economy.

If they do not redeem, what next? The law provides that you can quiet the title to your tax sale purchase. This is the lure for many people – to get property inexpensively. But there are problems here too. The due process clauses in our Federal and State Constitutions work against the tax sale purchaser. As currently interpreted by our courts due process requires that reasonable attempts be made to notify every stake holder in the property prior to the tax sale.  Often, this doesn’t happen.  Most title companies just assume that tax titles are flawed and will not write title insurance on it.

I find that the people who invest in multiple tax sale certificates do best at these auctions. They win on some and lose on others. The purchasers of sole tax sale certificates sometimes lose their entire investments.

What is a Purchase Agreement and why is it important?

JohnMenszer2-Crop_-0761For a buyer or seller of real estate the Purchase Agreement is a critically important document. It is the rule book or ”road map” for the transaction. Most people sign their Purchase Agreements without reading or fully understanding what they are agreeing to. Then, if there is a bad outcome, they call an attorney and want to get out of the contract.  It may be too late.

There is a Standard Agreement that is in common use among the real estate brokers and agents in New Orleans. It protects the commission of the realtors and splits the penalties between the buyer and seller roughly down the middle. It sets out the conditions for property inspections and financing. In a private sale it is not necessary to use this Standard Agreement. A seller or a buyer may decide they want to use a contract that is more favorable to them or meets their special needs. This is permitted. Or, the Standard Agreement can be modified with additional terms and conditions.

A real estate deal is a complicated venture involving property inspections, financing, appraisals, warranties, title issues, timing of events and a significant deposit. Many things can go wrong. As a result penalties can kick in and property can be tied up in litigation.

Consulting with a real estate attorney prior to signing a Purchase Agreement or hiring a lawyer to draft a modified or custom contract is time and money well spent.