Foreclosing on an Indiana Commissioners Tax Certificate

Last week I talked about buying a tax certificate in Indiana at a Commissioners Certificate Sale. These are unsold properties from the annual tax lien sale that were certified to the Board of Commissioners and have only a 120-day redemption period (vs. 1 year for those sold at the annual sale).  As promised, this week I’ll talk about the process for foreclosing on certificates that are not redeemed. 

Not less than 30 prior to the expiration of the redemption period (which is 120 days from the date of sale), the purchaser must send a Notice of Sale to the legal owner and any persons with a substantial interest of public record in the property that a lien has been sold on their property. The buyer must initiate a title search on the property to identify the owner and other interested parties.

The Notice must include all the information required by state law (see Indiana Code 6-1.1-25-4.5). The notice must be by certified mail and other reasonable efforts to notify the owner. If the property is redeemed, the owner will be required to reimburse the buyer for his/her actual paid title search expenses, not exceeding the amount established by the county, if the buyer files a form 137B with the Auditor prior to the redemption date. If the buyer fails to provide notice or provides insufficient notice as required by IC 6-1.1-25-4.5, the Court may impose a penalty equal to 100% of the purchase price.

The buyer must present a verified petition to the court that issued the original judgment for delinquent taxes and penalties on the property asking the Court to order the County Auditor to issue a Tax Deed if the property is not redeemed from the sale by the redemption period expiration date. If the buyer fails to fulfill the requirements for issuance of a court order directing the Auditor to issue a tax deed, the Court may impose a penalty equal to 25% of the purchase price and refuse to accept the purchaser’s petition for a deed under IC 6-1.1-25-4.6.

The next steps in the foreclosure process are as follows:

1. Present the court with proof that the time for redemption has expired. Also provide copies of all notices given to the owner and any person with a substantial interest in the property, including supporting documents (postal certified mail receipts, etc.).
   
2. Present the Court with evidence of payment of all taxes, assessments, penalties and costs, both at sale and subsequent thereto, and other evidence of compliance with statutory requirements as the court may require.
   
3. Present the Court with a copy of the Tax Sale Certificate.
   
4. Receive a Court Order directing the County Auditor to prepare the tax deed.
   
5. Present the Court Order and Tax Sale Certificate to the County Auditor and receive the tax deed for the property within 30 days.

You can go through the process yourself, or retain the services of an attorney familiar with the state requirements. If you are doing it yourself, be sure to check the relevant portions of the Indiana Code for specific details on this process.

Happy investing!

Michael Williams
816-673-1874


Rogue Real Estate Investor Collection

Indiana Commissioners Certificate Sales

Don’t miss out on upcoming Commissioners Certificate sales in Indiana, with their shortened redemption period!

The County Board of Commissioners is issued a tax sale certificate for all properties where the lien was not sold at the annual tax sale. Indiana law allows the Commissioners to have a second sale to try and sell these parcels. Also referred to as “expedited” or “B” sales, the period of redemption on these liens is shortened to 120 days (vs. 1 year) for the property owner and the buyer can receive a tax deed more quickly.

The governing state law for tax sales is found within Title 6 of the Indiana Code (IC) – Taxation: Article 1.1 – Property Taxes, Chapter 24 – Sale of Real Property When Taxes or Special Assessments Become Delinquent; and Chapter 25 – Redemption of and Tax Deeds for Real Property Sold for Delinquent Taxes and Special Assessments

Most of these sales are public, but SRI Incorporated conducts online Commissioner’s certificate sales for several counties in Indiana. SRI can be reached at 317-842-5818 or http://www.sri-taxsale.com/Tax/Default.aspx.

The certificate list must be published once each week for three consecutive weeks, with the final advertisement being not less than 30 days before the sale date.

The Commissioners are allowed to sell a tax sale certificate for an amount that is less than the minimum sale price that was required at the previous tax sale, and which includes any costs directly attributable to the sale of the tax lien certificate. The amount is set by county resolution. In a “B” sale, the minimum bid will include an estimate of the May tax installment.

The purchaser will receive a Tax Sale Certificate signed by the County Auditor and County Treasurer. The property may be redeemed at any time within 120 days from the sale date.

During the period between the tax sale date and the expiration of the redemption period and prior to the issuance of a deed, the buyer may pay all taxes, assessments, penalties and costs due for the property. Immediately upon paying for any additional costs, etc., the buyer should report the payment to the County Auditor's office with the receipts to record them. These costs must be filed on a Form 137B. The buyer will not be reimbursed unless he/she follows this procedure. Any costs incurred for notification and title search will not be reimbursed for an amount exceeding that set forth by the county.

When a tax sale property is redeemed, the Auditor will notify the purchaser and ask that the Tax Sale Certificate be delivered to the Auditor's office.

Once the Tax Sale Certificate is received by the Auditor, the purchaser will receive a refund equal to 110% of the minimum sale price and 10% per annum of the amount by which the purchase price exceeds the minimum sale price. In addition to the amounts stated above, the buyer will receive a refund for all taxes and special assessments on the property paid by the buyer subsequent to the sale plus 10% per annum interest on those taxes and special assessments.

Here is a list of upcoming Commissioner’s certificate sales:

JUNE 2011

Vermillion County, Indiana
June 16-27, 2011
Tax liens – internet
http://www.sri-taxsale.com/County/VERMILLION

Tippecanoe County, Indiana
June 17-27, 2011
Tax liens – internet
http://www.sri-taxsale.com/Commissioner/OnlineCertificateSaleList.aspx?county=Tippecanoe&event=0000000094&starts=2011-06-17T10:00:00&ends=2011-06-27T08:00:00

Noble County, Indiana
June 30, 2011
Tax liens – public
http://www.sri-taxsale.com/Commissioner/LiveCertificateSaleList.aspx?county=Noble&location=Noble%20County%20Commissioners%20Room%20-%202nd%20Floor%20Courthouse&starts=2011-06-30T10:00:00

Shelby County, Indiana
June 30, 2011
Tax liens – public
http://www.sri-taxsale.com/County/SHELBY

AUGUST 2011

Madison County, Indiana
August 3, 2011
Tax liens – public
http://www.sri-taxsale.com/County/Madison

Jennings County, Indiana
August 22, 2011
Tax liens – public
http://www.sri-taxsale.com/County/Jennings

Next week I’ll talk about the process for foreclosing on a certificate that was not redeemed.

If you would like to learn more about tax lien certificate and tax deed investing, click here.

Happy Investing!

Michael Williams
816-673-1874

Clearing Title on a Tax Deed Property

Question: Once I get the deed to a tax sale property, will I be able to take out a loan on that house, or will I have to clear the title first?


Answer: You generally will need to clear title before you can take out a loan. If there is a legal challenge period following foreclosure of a property, during which the previous owner or other interested party can challenge the tax sale, you will normally have to wait for that period to expire before you can clear title. In California, for example, the legal challenge period is one year; in Arkansas it is two years. Usually counties/states advise that you not make any major improvements to the property during this time period.

We work with a company that can, in most cases, clear or perfect the title in about 45 days. Their costs are reasonable and they have been doing it for years. This is a wholly separate company, so we will just provide you with the personal contact.


Contact us at 913-381-4520 or info@rogueinvestor.com.
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The Platinum Rogue Investor Collection has the answers to all your tax sale questions!
www.rogueinvestor.com/government_tax_sales_book.html

Purchasing U.S. Tax Lien Certificates from Abroad

Buying tax liens or tax deeds in the U.S. normally requires a social security number or a federal tax I.D. number. One way for nonresidents to work around this is to start a small business, such as a limited liability company (LLC), and receive a federal tax I.D. number.

Another method is to obtain an Individual Taxpayer Identification Number (ITIN). According to the U.S. Internal Revenue Service, federal law requires individuals with U.S. income, regardless of immigration status, to pay U.S. taxes. The ITIN, a nine-digit number that begins with the number 9, was created for use on tax returns for those taxpayers who do not qualify for a social security number. The IRS has issued 7 million ITINs since 1996.

For more information, visit http://www.irs.gov/newsroom/article/0,,id=112728,00.html.

Any nonresident or U.S. resident alien who is required to file taxes or who can be claimed as an exemption or dependent on a tax return, and who does not qualify for a social security number, can apply for an ITIN. See Publication 501, “Exemptions, Standard Deduction and Filing Information for Exemption Tests” and Publication 519, “U.S. Tax Guide for Aliens” to determine resident status.

You do not need an ITIN if:

• you are a U.S. citizen,
• you were born in the U.S. and do not have diplomatic immunity,
• you have entered the U.S. on a work VISA, or
• you are entitled to a federally funded benefit (stipend/fellowship/grant).

You are eligible for an ITIN if:

• you have entered the U.S. on a non-work VISA,
• you were born in the U.S. and have diplomatic immunity,
• you have applied for and were denied a social security number, or
• you are an undocumented alien.

You can obtain ITIN application forms, W-7/W-7SP, through IRS offices worldwide:

• 1-800-TAX-FORM (1-800-829-3676)
• http://www.irs.gov/
• Tax Fax Service at 1-703-368-9694
• IRS kiosks.

Submit your ITIN forms and supporting documentation to:

• IRS Taxpayer Assistance Centers (TACS),
• certain U.S. consular offices abroad,
• a Certified Acceptance Agent, or
• mail to:

PSPC ITIN Unit
P.O. Box 447
Bensalem, PA 19020
DP N-280

For ITIN Frequently Asked Questions, visit:

http://www.irs.gov/individuals/article/0,,id=96287,00.html.

Download Form W-7, Application for IRS ITIN, at http://www.irs.gov/pub/irs-pdf/fw7.pdf.

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Visit http://www.rogueinvestor.com/ for more tax lien certificate investing information.

Tax Foreclosures and the Mortgage

Question: What happens to the original mortgage on a home after a tax foreclosure?


Answer: The mortgage company is like an owner of the property. It receives notification of the taxes due, and can redeem the taxes to avoid a foreclosure. If the property goes through tax foreclosure (i.e., to deed), you as the investor own the property. However, in some states there is a legal period following tax foreclosure during which the previous owner (or mortgage company, lien holder, etc.) can challenge the sale. Otherwise, tax foreclosure wipes out the mortgage and most other liens, except federal IRS liens and county or city assessments. In New Mexico, mortgage liens may not be extinguished. In Pennsylvania, mortgage liens are not extinguished on properties sold at the Upset Price Sale. Properties not sold at the Upset Price Sale are auctioned again, free and clear of liens (including the mortgage), at the Judicial Sale.

Visit www.rogueinvestor.com/government_tax_sales_book.html for more information about tax sale investing.

ASSIGNMENT OF TAX LIEN CERTIFICATES

“Assignment” of a tax lien certificate is simply the process by which the holder of the certificate changes from one party to another. The assignment of tax lien certificates may be conducted by individuals, or by the taxing jurisdiction itself (e.g., counties and municipalities).

Individuals

Perhaps you have decided that it is time to sell your tax lien certificate. You may want to buy something different, or you may just want the cash. Many state tax sale laws allow the assignment of a tax lien certificate from the holder to another party (the assignee). Because the state law may give individual counties a choice in allowing this, you will need to contact the county to ask if they allow assignments, if there is a grace period for doing so, and what the process is.

The county may require a grace period of six months to a year before you can assign a certificate. Typically, the county will charge a fee to process the assignment (in Douglas County, Nebraska, the fee is $10), and documentation on the party the certificate is being assigned to. Most counties want to be sure that the certificate holder does not have any outstanding taxes or other fees due to the county.

Taxing Jurisdictions

In many states, when a certificate goes unsold at a sale the lien is sold to the county itself (or other taxing jurisdiction). Because no one bid on them, these certificates always accrue the highest interest allowed by state law. Typically, the county can either assign these certificates “over-the-counter” (i.e., you can purchase certificates directly from the county through the mail) or foreclose on them and then sell the properties. Counties generally aren’t in the business of owning and selling real estate, so assigning the certificates is a more attractive option to them. In addition, foreclosing and selling property takes time and has added costs associated with it.

Assignees

As an assignee, you will want to understand the tax lien certificate process in the county you are buying a certificate in, the collateral for the tax lien, and what the rate of return is for your investment. Although the assignment does not represent a sale of real, physical property, you should do your due diligence on the property in case you have the opportunity to foreclose on it. You should ask yourself why this lien wasn’t purchased at the sale.

Visit www.rogueinvestor.com/government_tax_sales_book.html for more information.

Veteran's Administration Foreclosures and Vendee Financing

The Veteran's Administration has a wonderful program that allows our veterans to qualify for a home with no money down. It is really a benefit that we extend to service men and women to say thank you. In most cases, it works well. However, the downside is that default rates are higher than properties purchased with 5, 10 or 20 percent down. So even though a bank may have issued the mortgage, the U.S. government is responsible for a defaulted mortgage.

In the VA program they do something unique to move these properties. The VA offers its own financing called VA Vendee financing. So, even if you are an investor, you can qualify for VA financing. Most prospective home buyers and investors do not understand the difference. You Do Not Have To Be A Veteran to qualify for VA Vendee financing.

And, here are a few other facts that make it interesting:

• Vendee mortgages are assumable by qualification
• Vendee financing is not a credit score driven product
• Low interest rates - usually the going rate
• Owner occupied can be financed as little as 0% down
• Investors can finance as little as 5% down
• Investors can use 75% of the anticipated rent to offset monthly payments
• No maximum number of investment properties.

Join me in Kansas City, Missouri on November 13-14, 2010 to learn more about buying government and bank foreclosures. We will spend one whole day looking at properties that you can purchase right then.

www.rogueinvestor.com/foreclosure_bootcamp.html