Has anybody had luck purchasing properties from Sheriff Sales? If so, how diligent can you be with the property, outside of doing a title search?
General BackgroundFirst, since this comes up a lot, if youu2019re talking about land that has back taxes on it, you cannot get land with back taxes by paying only the back taxes. I had a number of people tell me, when we were looking for land, that if you could find land with back taxes due, all you had to do was pay the taxes. One person even argued with me about it, even though I had spent days and weeks researching tax auctions and property issues and they had only seen the list of back tax properties in the county paper.If you mean at any tax auction, run by a local government, due to lack of payment of taxes, Iu2019ve seen a number of people buy properties this way, mostly by flippers or other investors. I am now sitting in my study in a house we got the CO (Certificate of Occupancy) about 6 weeks ago, on a 24 acre lot bought at the county auction for $22,500 less than we were willing to pay for it if it had been sold outright.Sometimes localities donu2019t use a u201csheriffu2019s auctionu201d as such, and confiscated properties are handled the same as any other properties the locality will be auctioning. At least around here, land isnu2019t necessarily confiscated during the process. In our case, the owners were hit with about a third of a million dollars in tax liens from the IRS and civil judgements against them. I found that even when they have a lien on a property, the IRS does not necessarily auction it. They have to feel that they have a good chance of the property selling for a good amount, or at least the amount of the lien. In the case of this property, the market value was far from the amount of the original IRS lien, however by the time of the auction, the amount of the lien was much lower. (I donu2019t know if it was paid off or negotiated down.)Buying at an AuctionThe process can vary from state to state and locality to locality. I found one lawyer who now handles property auctions for the locality where we bought our land. He handles the tax auctions for a number of counties and cities in our state now and does a good job. Some localities may hire a lawyer to handle the process and some may have their own lawyers handle the auction process. Iu2019m not sure about confiscated land, but if land is being auctioned due to unpaid taxes, there is a full process that must be followed before the auction. The locality (or the lawyer handling it for them) has to do a title search to verify ownership and find any outstanding issues that may have to be handled. Then they file a lis pendens and, after that, they have to go before a judge to ask permission to hold the auction. Then they set the date, advertise the auction, and hold it on the set date. (Of course this process is simplified and can vary from place to place.)If I were looking for land to buy to live on (or use for recreation), or if I were looking for investment property, I would get on the mailing lists from all the localities in the area I was searching. Remember, donu2019t look for only land thatu2019s been confiscated due to criminal activity, but for tax purposes as well.Iu2019d check out the land (and any buildings) in every way I could. If the buildings are recent, the plans may still be on file. (Contrary to what movies show, plans are not always kept forever for all buildings.) Go to the localityu2019s courthouse and visit the clerku2019s office. Ask to view the file on the property auction. Thereu2019s a good chance itu2019ll include the title search they had done before the auction. (Youu2019ll probably have to sit in their office or at a window where you can be seen while reading the file.)Read everything in the file you can. Study it to make sure everything is done properly. Then ask for copies of any significant papers, including (especially) the title search and any information on who did it. You may find that you can get title insurance based on this title search if the original agent or corporation will prcopies as needed.If the file doesnu2019t include a title search, or if you donu2019t trust it, then get your own title search to verify ownership. In my case, Iu2019m not a pro, but I do verify title searches on my own - sometimes you can go farther back than what the search does or you might find details they missed. (Although thatu2019s not likely.)Check the title search carefully for easements and other conditions. If mineral rights concern you, look for information on that. At some point, the title search should include copies of a deed with an official survey of the property. If you can go on the property, Iu2019d check for the survey nails to see if you can verify any information from the survey - maybe not down to the inch, but watch for things like if the driveway is actually on the lot. (Thatu2019s just an example. Some places have peculiar or interesting laws/regulations about driveways, setbacks, required road frontage, and other issues.)Also find the county or city GIS. Some places donu2019t have this yet, but most have a GIS (Geographical Information Service) online, or at least tax maps. The GIS will give you a map of the whole county or city with property lines drawn and often with buildings outlined. Verify the lot is not landlocked or, if it is, that there is an actual easement (which would be recorded as a deed on the property the easement goes over) and is not just the result of u201cuncle Bob and uncle Fred shook hands on it in u201875.The GIS should also show if there are wetlands on the property. Wetlands are a full issue to themselves. You cannot build on or, in general, modify wetlands. (That includes creeks, lakes, ponds, swamps, and more.) Most places have RPAs (the name may change from place to place), or Resource Preservation Areas, around the wetlands. In our area, that means a 100u2032 buffer around the actual wetlands where nothing can be built. If you have wetlands on a property but it has not been built on, you may need to get a RPAD (RPA Definition) to specifically define where the RPAD ends. Find out what the setback from the RPA is, since you will probably not be allowed to build in an RPA or the setback.The GIS will also likely show you the 100 year floodplain. Check that out. While you might negotiate to build in an RPA if thereu2019s no place else to build on the lot, you likely will not be able to build within the floodplain. Also, weather is changing and storms are becoming more severe, so you may even want to avoid building within the 500 year floodplain. (I know where I am now had 3 storms that were 100 year storms in about 40 years, in u201869, u201872, and u201905.)What you want to do may depend on what your plans are. For instance, if you are just planning on buying the property and reselling it for a profit (or doing some work to improve it, then sell it), some of these may not be an issue for you. For instance, a house built within the floodplain may be legal in your area and you may be okay with selling that to someone. (The buyer does have a responsibility to check on those things - Iu2019ve seen cases where buyers are selling land a year later because they didnu2019t do research and check the local GIS that would have told them, with about 2 minutes of research, that the property was unsuitable for their plans.)If youu2019re buying land with a building on it, then, of course, you have all the considerations of the building issues, too. You may not be able to get the building inspected (likely there will be occupants or other reasons you canu2019t do it), so you need to be prepared for things to be worse than they look from the outside. If youu2019re fixing it up, you canu2019t be sure how much itu2019ll cost without doing your own inspection or hiring someone to do one. If youu2019re looking for a place to live, understand thereu2019s a good chance you may not be able to move right in and you may even be responsible for handling an eviction (depending on your locality) once you take ownership.When you ask about the title search, youu2019re on the right track. That is probably the most important thing to consider, but Iu2019d check out the other issues, too. Even if you donu2019t have wetlands on the property, nearby wetlands could still mean you have an RPA to deal with. If there is a building, check out what you can to be sure itu2019s not about to fall down and is up to code. Be aware there could be occupants there that need to be evicted.Our Experience and ProcessOnce the owners were hit with the IRS lien on this lot, which is not their residence, they stopped paying property taxes on it. (The reasoning, apparently, was that since the IRS was going to take it anyway, there was no point in paying local property taxes on it.) That was what cost them money, in the long run.We didnu2019t know about the lien and saw the property listing and put a contract on it. Then, when we had done all our own research and were sure we wanted it, the title search came back and we found out about the liens. Even while the legal process was underway, we still had access to the property while it was under contract. Or lawyer kept in touch with the lawyer handling the auction process (as much as he could - the lawyer doing the auction lied to us several times and was not making any effort to do his job). He was going to let us close our sale normally, as far as we were concerned. (My understanding was that if that happened, weu2019d pay for the land, but the money for the county liens, the IRS lien, and the lawsuits would have been deducted from it before anything was given to the previous owners.)Since the owners stopped communicating with us once we asked them about the tax lien, ultimately, the only thing we could do was notify the lawyer handling the auction and let him proceed. He sat on it for two months and only started acting on it when I discussed the situation with the county treasurer. Then he finally started doing his job.By the time the auction was done, I had spent a lot of time at the courthouse, going through records, and expanding on the original title search. (I know the history of this lot for over 100 years and even know about it being part of a pre-Civil War estate.) I had also spent time pouring over the records in the clerku2019s office regarding the auction and all the steps leading up to the auction. (Which is how I found out the lawyer handling the auction had lied to us.)The auction was held on the courthouse steps, with a number of people bidding. (A few people wanted it to build a house on it, and others were groups of hunters who wanted it.) Since we were willing to pay market value, I figured we had a good chance of winning (otherwise weu2019d have had competing offers when we were trying to buy it from the owner). The frustrating part was that the bids went up much higher than I expected, so we didnu2019t save nearly as much as I expected.After the auction, I found that the previous owners now owed the IRS much less than their original tax bill. I paid the county and first the county tax liens were deducted, then the amount of the IRS lien, then the amounts owed from civil lawsuits. What was left was finally paid to the previous owners.Once it was in our name, we had a clean title (and since it was written up due to the auction, some of the restrictions that had been in former titles were left out). Then we started the process to delineate the wetlands and determine where we could build the house. Then we moved forward and built our house.
