new home expenses that aren't the house itself
April 20, 2012 12:43 AM Subscribe
Buying a tax auction house: how much money do I need to set aside for other immediate expenses? Is there anything else I should know?
- I'm going to do a whats-it-called check to make sure there's no mortgage on the place, but the county says there probably won't be.
- since it's a tax auction, the house is being sold as-is. it looks fine from the outside. I understand there could be problems inside, but the outside looks like it has been kept up, which is promising.
- annual city, state (reasonable in this state) and [federal?] taxes (USA)
What other questions should I be asking myself about this house?
Ok. So assuming the house even makes it to the auction, and further assuming that I manage to be the lucky winner with the tiny sum of money I have available to me, then what? Then I pay up and can move in? Is there anything else I need to know about tax auctions? I am willing to kill my savings account but I need to know how much I need to leave in the account for other immediate-concern house-related expenses (assuming the house is in working order).
cross your fingers for me
- I'm going to do a whats-it-called check to make sure there's no mortgage on the place, but the county says there probably won't be.
- since it's a tax auction, the house is being sold as-is. it looks fine from the outside. I understand there could be problems inside, but the outside looks like it has been kept up, which is promising.
- annual city, state (reasonable in this state) and [federal?] taxes (USA)
What other questions should I be asking myself about this house?
Ok. So assuming the house even makes it to the auction, and further assuming that I manage to be the lucky winner with the tiny sum of money I have available to me, then what? Then I pay up and can move in? Is there anything else I need to know about tax auctions? I am willing to kill my savings account but I need to know how much I need to leave in the account for other immediate-concern house-related expenses (assuming the house is in working order).
cross your fingers for me
In many places, you can check on your city's web site for the local property tax assessment, often even historically, for a property. Around here, a moderately decent house will typically run around $5000/year for property tax, so make sure you budget about 10% of that monthly and set it aside.
You might look into title insurance, a typical part of buying a home, which makes sure that the title to the house is unencumbered, and which places the resources of a large company on your side in the event that their research as to the status of the home is wrong.
Tax auctions can vary from area to area, but generally speaking, they are the result of the failure of the previous owner to pay tax, and as a result the owner loses the property. With a mortgage, the bank may be deemed to own the house, and if so, any claim it may have had on the house may be forfeit because they failed to pay property tax on their property; this is, sadly, a complex area in practice so it might help to retain a lawyer to help you sort through the actual realities of your particular case.
Houses are money sinkholes. You might need a new furnace - $4000. You might need a new roof - $15000. You will need to change the locks for sure - $200. You need to have a game plan to deal with the ongoing and unexpected expenses a house can produce at the most inconvenient times.
posted by jgreco at 5:06 AM on April 20, 2012
You might look into title insurance, a typical part of buying a home, which makes sure that the title to the house is unencumbered, and which places the resources of a large company on your side in the event that their research as to the status of the home is wrong.
Tax auctions can vary from area to area, but generally speaking, they are the result of the failure of the previous owner to pay tax, and as a result the owner loses the property. With a mortgage, the bank may be deemed to own the house, and if so, any claim it may have had on the house may be forfeit because they failed to pay property tax on their property; this is, sadly, a complex area in practice so it might help to retain a lawyer to help you sort through the actual realities of your particular case.
Houses are money sinkholes. You might need a new furnace - $4000. You might need a new roof - $15000. You will need to change the locks for sure - $200. You need to have a game plan to deal with the ongoing and unexpected expenses a house can produce at the most inconvenient times.
posted by jgreco at 5:06 AM on April 20, 2012
Head down to the county building and ask. Know that tax auctions have regulars. I recently bid on a house for a client, and there were four guys there that show up every week. If the house is worth having, you can bet that someone else there already knows about it and is prepared to pay more than you can afford.
posted by valkyryn at 6:05 AM on April 20, 2012
posted by valkyryn at 6:05 AM on April 20, 2012
If the house is worth having, you can bet that someone else there already knows about it and is prepared to pay more than you can afford.
Not always - this is how my Dad bought his house, on the steps of the courthouse down in Texas a few years back. He got a 4 bedroom, 2 bath house on 11 acres of land for $37,000. Given that the school district is highly sought after in that area, his realtor has suggested that, if he decides to sell, he should ask for no less than $450,000.
Yes, he had to do some work to the house. It needed an updated AC and he replaced the floor throughout the entire house. But still - he got a great deal on a nice piece of property.
( It also came with a ski boat, two 4-wheelers, a tractor and a lot of tools and equipment in the shop, but Dad was nice enough to let the previous owner pick them up and take them. By law, he didn't have to.)
posted by bradth27 at 8:09 AM on April 20, 2012 [2 favorites]
Not always - this is how my Dad bought his house, on the steps of the courthouse down in Texas a few years back. He got a 4 bedroom, 2 bath house on 11 acres of land for $37,000. Given that the school district is highly sought after in that area, his realtor has suggested that, if he decides to sell, he should ask for no less than $450,000.
Yes, he had to do some work to the house. It needed an updated AC and he replaced the floor throughout the entire house. But still - he got a great deal on a nice piece of property.
( It also came with a ski boat, two 4-wheelers, a tractor and a lot of tools and equipment in the shop, but Dad was nice enough to let the previous owner pick them up and take them. By law, he didn't have to.)
posted by bradth27 at 8:09 AM on April 20, 2012 [2 favorites]
Response by poster: This is in California. It looks like the last chance for the previous owner to pay the taxes and get the house back is right before the auction.
posted by lover at 10:42 AM on April 20, 2012
posted by lover at 10:42 AM on April 20, 2012
Here's some fun stuff to thing about:
1. Chinese Dry Wall
2. You should have plenty of money to buy new appliances (as the previous owners may have taken them, including the hot water heater and the A/C unit.
3. Mold
4. Radon
As soon as you buy it, pay for a professional inspector. Inspections are about $500 (for good ones) and will give you an idea of the good, the bad and the ugly about your house. If you're balking at the expense DON'T BUY A HOUSE!
posted by Ruthless Bunny at 2:10 PM on April 20, 2012
1. Chinese Dry Wall
2. You should have plenty of money to buy new appliances (as the previous owners may have taken them, including the hot water heater and the A/C unit.
3. Mold
4. Radon
As soon as you buy it, pay for a professional inspector. Inspections are about $500 (for good ones) and will give you an idea of the good, the bad and the ugly about your house. If you're balking at the expense DON'T BUY A HOUSE!
posted by Ruthless Bunny at 2:10 PM on April 20, 2012
Response by poster: The county recommends getting a title search. It also says the following. I know you aren't a lawyer or my lawyer or whatnot, but does this look to you like it means I don't have to worry about a mortgage if there is one? It looks like I'll mostly only be responsible for taxes?
A title search initiated at the purchaser’s expense should reveal any liens or encumbrances of record on a property in the tax sale. Per Revenue and Taxation Code Section 3712:posted by lover at 3:19 PM on April 20, 2012
“The deed conveys title to the purchaser free of all encumbrances of any kind existing before the sale, except:
a. Any lien for installments of taxes and special assessments, which installments will become payable upon the secured roll after the time of the sale.1
b. The lien for taxes or assessments or other rights of any taxing agency, which does not consent, to the sale under this chapter.
c. Liens for special assessments levied upon the property conveyed which were, at the time of the sale under this chapter, not included in the amount necessary to redeem the tax-defaulted property, and, where a taxing agency which collects its own taxes has consented to the sale under this chapter, not included in the amount required to redeem from sale to the taxing agency.2
d. Easements, constituting servitude upon or burdens to the property, water rights, the record title to which is held separately from the title to the property, and restrictions of record.
e. Unaccepted, recorded, irrevocable offers of dedication of the property to the public or a public entity for a public purpose, and recorded options of any taxing agency to purchase the property or any interest therein for a public purpose.
f. Unpaid assessments under the Improvement Bond Act of 1915 (Division 10 (commencing with Section 8500) of the Streets and Highways Code), which are not, satisfied as a result of the sale proceeds being applied pursuant to Chapter 1.3 (commencing with Section 4671) of Part 8.
g. Any federal Internal Revenue Service liens which, pursuant to provisions of federal law, are not discharged by the sale, even though the Tax Collector has provided proper notice to the Internal Revenue Service before that date.3
h. Unpaid special taxes under the Mello-Roos Community Facilities Act of 1982 (Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code) that are not satisfied as a result of the sale proceeds being applied pursuant to Chapter 1.3 (commencing with Section 4671) of Part 8.”
1 The delinquent taxes and the current secured taxes will be paid in full.
2 This section does not apply in Del Norte, Modoc, Sierra, Siskiyou, Tehama, Trinity, Lassen and Solano Counties.
3 The IRS has the right to redeem the property from the purchaser up to 120 days after the sale. If the IRS redeems the property, it will reimburse the new owner for the purchase price plus interest at 6% per annum from the date of sale, plus expenses of sale that exceed any income received from the property. If no action is taken within this period, the lien is extinguished.
Yeah, that sounds reasonable. Assessments and other things are essentially a special tax that applies only to your property, such as if they were to re-do the sidewalk in front of your house or something like that.
You will definitely want to look at what I wrote above about title insurance, they'll know how to do the research, and I'm thinking they might be able to give you some sort of deal on the insurance, since the legal angles look simpler if the tax code generally guarantees title free of encumbrances.
The cited text would definitely appear to preclude any significant risk from a mortgage holder. A reasonable attitude, in my opinion: if the mortgage holder doesn't want the house lost to tax foreclosure, then the mortgage holder needs to pay the taxes. The tax authority doesn't really care who pays the tax, but if nobody does, then the property is eventually forfeit and auctioned off to pay the tax. It wouldn't make a lot of sense to sell the property and then have it encumbered by the previous owner (the bank) who didn't pay the taxes.
posted by jgreco at 3:35 PM on April 20, 2012
You will definitely want to look at what I wrote above about title insurance, they'll know how to do the research, and I'm thinking they might be able to give you some sort of deal on the insurance, since the legal angles look simpler if the tax code generally guarantees title free of encumbrances.
The cited text would definitely appear to preclude any significant risk from a mortgage holder. A reasonable attitude, in my opinion: if the mortgage holder doesn't want the house lost to tax foreclosure, then the mortgage holder needs to pay the taxes. The tax authority doesn't really care who pays the tax, but if nobody does, then the property is eventually forfeit and auctioned off to pay the tax. It wouldn't make a lot of sense to sell the property and then have it encumbered by the previous owner (the bank) who didn't pay the taxes.
posted by jgreco at 3:35 PM on April 20, 2012
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posted by procrastination at 4:31 AM on April 20, 2012 [1 favorite]