I’ve recently come across this deal, I’d like to hear your opinion on how to handle this case:
The property has no mortgage, but with the following back dues and liens.
Back tax: the seller is two years behind his property tax with an outstanding balance of $500. The county assessor confirmed that he wouldn’t be putting on the delinquency list for a very long period of time as the amount he owed is not significant.
HOA back due and liens: The property is in an HOA and the HOA has hired an attorney and sent the seller a letter of “Statement of Assessment Amount Due and Notice of Association’s intent to seek Payment of Attorney’s fees, costs and expenses”. That is to say, if I close this deal, I will have to pay an outstanding $1,000 back dues on HOA fee, interests on HOA back dues, and costs associated with hiring attorney.
Involuntary lien: The seller said he had quite a few real estate problems a few year ago but he thought this shouldn’t affect this property he is selling.
Here are my concerns:
Will his previous real estate problems affect this transaction we are going through? Is there any possibility that a third-party agency might impose liens like judgement liens or any other types of involuntary liens on this property? How can I find out if there is any other type of liens against the property?
To my knowledge, I will have to pay HOA back dues, interests on HOA back dues, back dues on county property tax, attorney fees (attorney hired by HOA). Is there any other type of hidden costs associated with this deal? Do I need to pay extra for my closing attorney to do the work?
Is there any other Dos and Dons that you think I should be aware of but not mentioned above?
First let me say I am not an attorney. The first thing I would hire a title company to do is a title search. This is assuming that you have a contract with the seller first. The search will tell you everything that is filed on the property and government liens filed on the seller. You should check to see it there is a water bill that has not been paid because that will follow the property. In New York you should have an attorney to close the property although you can close it yourself. But, it sounds like you should get an attorney. Shopping for my attorney on line can save money also buy title insurance on the property.
I agree with @Cstone - I’d close with a title company to ensure all the “gotcha’s” are identified. If the economics on this one are such that they don’t support a title company close, beware as one unexpected gtotcha willwipe out the economics.
@cstone Thank you Dale, thank you for your input, and the property is located in an attorney closing state, so I will have to hire an attorney to do the deal. Regarding the water bill, it’s vacant land, and am I supposed to assume there is no water bill?
I know you said you are in an attorney state but I have a title company that helped me out in the past to do a tax lien property. I was happy with what they did but that was a special circumstance. I am now (as of today) using them again and they have told me they can close in Alabama in 10 to 15 days. On their website they claim they can close in all but 5 states. Their fee was OK for me as I am selling a property, my side is $250 and the buyer’s is little less than $1000 but that includes title insurance. Now I would tell you the name of the title company but I want to try them out again and I don’t want to endorse them if they let me down. Check back with me in a couple weeks.
@cstone Hi Cstone, this property is in North Carolina. I’ve been paying somewhere between $1,500 and $1,700 for the property purchase prices ranging from $3,000 to $5,000. I do cover the seller’s side of closing cost but the attorney costs are eating up a big chunk of my profit. Does your title company cover North Carolina?
Regarding the water bill, it’s vacant land, and am I supposed to assume there is no water bill?
Unfortunately, you cannot reliably assume that. I’m closing on a vacant land deal now (purchase) where there is some nominal quarterly fee charged by the county’s water/sewer authority. There are no improvements on the lot at all, but there’s still a minimum charge, just for having service available to be connected at the property.
@Cstone was dead on that you should check to see if there’s a water or sewer authority in your case, because if the seller was delinquent on taxes and HOA dues, if there is a water bill, it seems likely he’s delinquent on that too, in which case you’d want to build that amount into your numbers to make sure the deal still works at the price you intended.
Unfortunately, you cannot reliably assume that. I’m closing on a vacant land deal now (purchase) where there is some nominal quarterly fee charged by the county’s water/sewer authority. There are no improvements on the lot at all, but there’s still a minimum charge, just for having service available to be connected at the property.
Dale King was dead on that you should check to see if there’s a water or sewer authority in your case, because if the seller was delinquent on taxes and HOA dues, if there is a water bill, it seems likely he’s delinquent on that too, in which case you’d want to build that amount into your numbers to make sure the deal still works at the price you intended.
Thank you so much, I will definitely look into that. Have a great weekend.