Anyone familiar with the tax lien certificate process? (for sale, real estate)

[krispro6]

Kind of a long story, but my husband and I are attempting to purchase a neighbor’s house and although the owner agreed to our purchase price, he is apparently going through a somewhat messy divorce and his ex-wife would not agree to our offer. Apparently as part of the divorce settlement she gets all the proceeds of the house and she wants more! Last we heard the owner said he put an order in for the court to have the house sold and he didn’t know what was going on. Not sure how that works, but even if the court orders the house to be sold (presumably, put on the market?) I’m assuming she’s going to have to agree to a purchase price and we are in the same place.

During this process I looked up the property tax bills and found that the owner didn’t pay his 2009 and 2010 property taxes and tax certificates were sold to Western Sites LLC. I know normally a foreclosure would kick in before a house is lost to a tax certificate holder, but this guy bought the house for cash and there is no mortgage. There’s speculation that the owner might be trying to lose his house so he doesn’t have to pay his ex anything (although I’m not sure how the courts would see it). Anyone familiar with the tax certificate process? How long before a holder of tax certificates can take the property? Does the owner then have a redemption period to attempt to reclaim the property? The property is located in Grundy County.

[chet everett]

To be blunt, your neighbor has some terrible advice. I know from experience that Illinois has some of the highest rates for liens and one of the shortest periods for redemption -- Tax Lien Certificates in Illinois IL

I similarly doubt that the divorce court will allow his efforts to make the title clouded / transferred to a lien holder to absolve him of the financial decree.

This is a stupid waste and you ought not get involved...

[yousah]

That website you quoted doesn't seem right. There is no fixed interest rate- the bidders actually bid DOWN and the bidder with the LOWEST interest rate wins.

Nonethless, it's extremely unusual to eventually get to own a house in this way because the lender will almost always step in to pay the taxes themselves. It's more of a financial investment to get a return on your money.

The simplest way is to present an offer to the seller and let his attorney handle it. There is usually an appraisal involved on the subject property and your offer, if reasonable, might be accepted by the parties. Your offer will become something that the judge might consider if it isn't too far off from the appraised value.

Definitely get an attorney because you want clean title if you were to purchase this property.

[dwmiller]

There has been some good advice given, but as someone that buys tax lien certificates, I will explain the process to you. Let's say your neighbor owes $300 in property tax to the county; He fails to pay these taxes. The county then issues a tax lien certificate against the property. I as an investor, can come along and agree to pay the back taxes of $300 to the county. In return for me paying the taxes, the county issues me a tax lien certificate against the property. I now have a legal lien against the property. At this point, the clock starts ticking. Your neighbor has 2 years in IL to redeem the tax lien; ie, pay the $300 dollars plus an 18% annual penalty interest to the county. This money would come back to me. If your neighbor pays, everything is great. The bank, or any other person with a financial interest can pay as well.

Now, lets say your neighbor doesn't pay during the redemption period, and no other person comes forward; I then can start the process for application of a tax deed; ie, I start foreclosure on the property. I would own the property free and clear.

Now, at this point if your neighbor lives in the property, I can rent to your neighbor until he gets back up on his feet, and can pay again to purchase the house. If your neighbor cannot pay anything, I would have no choice but to evict your neighbor from the property. I then get to decide if I want to keep the property, or put the property back up for sale to make myself a nice profit from the sale.

I hope this helps you out.

[linicx]

The first thing I would do is go to the tax office in the county courthouse of record and find out who exactly is the owner and exactly the dollar amount due for back taxes. It may be thousands of dollars. You may have to pay the tax bill in full if you want the Tax Certificate - if you win the auction.

If you do not have a contract to purchase signed by all parties involved, it is probably not worth the paper it is written on. The two of them can find creative ways to tie it up in court for years.

[linicx]

Woah!

You said. "During this process I looked up the property tax bills and found that the owner didn’t pay his 2009 and 2010 property taxes and tax certificates were sold to Western Sites LLC.

He cannot sell anything until Western Sites LLC is Satisfied. Now you know there is at least one cloud on the Title. You cannot get a clear title until Western Sites LLC is removed.

This is why you need a real estate lawyer if you want to pursue purchase. It also possible you could buy the tax certificates, too.

[krispro6]

Thanks everyone. I did learn that IL changed its law allowing a home owner 3 years (instead of 2 years) to redeem the tax certificates before the tax certificate holder can take over the property. We ultimately decided to pass on this particular house due to structural issues and have gone back to the drawing board!