Getting a handle on statistical and physiological aspects affecting foreclosures is a time consuming task. You and I mechanically trod through the document garden picking up a grant deed here and a trust deed here—and maybe an abstract of judgment over there. It takes a while, but with diligence we can amass a statistical version of what happened in most foreclosures.
The grant deeds we commonly see show the enthusiasm prevalent on the date of purchase and the cash flow out of the property to the owners a short time after acquisition of the property. In the heady days of the middle and later last decade, all of us led a charmed life and borrowed heavily on the presumed equity that seemed to flow unaided from our recently acquired property. It is true that some thwarted buyers were more suspicious of the unearned largess we reveled in. But all in all life, flowed grandly and happily through the short months of frivolity and joy. We know now—only looking backward, that a day of reckoning was showing lightly on the horizon. Most of us let the dance go on with nary a blink of the eye.
Why did so many of us miss the reality of the obligations that go with the rights of ownership of residential property? Now we know. What goes up—does not have to continue to do so, but unhappily it all can come down. And it did! How did we miss all the signals?
It is possible to get overly impressed with apparent competency. We knew what we were doing. What worked so well earlier should, by all rights, continue in our current world. It didn’t. Maybe we should have been looking at a more widespread picture of the real estate market. Sometimes there are indicators that show that all is not well with a particular property.
One of those indicators is such an obvious one. Even before “the bubble”, it was possible to ferret out problem properties that could justify a closer look.
As assessed values of properties skyrocketed way beyond “normal”, many wildly enthusiastic residential properties owners were stumbling around—unable to meet even modest real property tax obligations in a regular basis. Such taxes are due twice each calendar year, and such taxes were such a small portion of the property values in the burgeoning residential market. Some owners, even in those heady days, continued to miss paying real property tax obligations to the county on a regular basis. Shouldn’t such owners haves gotten an inkling that the future looked much less bright?
Those of us sniffing around looking for “problem” properties really weren’t so clever after all. Here was a significant indicator that the residential property owner already had lost the capacity to meet minimal obligations of ownership—and we missed it!
As a matter of fact, when we step through all the documentation accompanying residential property ownership, we regularly ignore the painfully obvious fact that these property owners already are in difficulty. Modest payments of real property taxes were missed this year by the owners of our chosen property. If we had had the common sense to look further, we might have found out that the same owners had been in arrears in real property tax payments for some years before that! There are clear indications that financial problems for the owners are lurking in the near future. How could we have missed that?
You already know that unpaid real property taxation is important to lenders. Some lenders will combine such tax obligations with principal and interest payments due monthly to borrowers.
You know the routine. First real property tax payments are due initially on November 1st of the current tax year and delinquent after December 10th. The second payment is due February 1st and delinquent after April 10th of the next year. Ten percent penalties are added on missed current year taxes and jump to eighteen percent per year (one and a half percent per month) after the first unpaid tax year. Real property tax delinquents find that missing payments can result in sale of the property by the county in which the property is located for the total of the unpaid taxes after the fifth year of delinquency. That’s downright scary—since residential property values commonly exceed the total tax amounts due by a healthy margin.
I am bothered by my own myopic view of indicators for residential property owners in trouble. You and I know better than that. Here we were charging ahead while we spent many hours and countless days uncovering critical records involving all kinds of deeds, abstracts, etc., and we missed such obvious indicators of property owners who might have liked to talk to us—those with continuing real property tax problems. What were we thinking?
You will recall that I am a real estate broker, instructor, and mentor to investors specializing in the purchase of foreclosures at the trustees’ sales.
Many people want to buy residential properties in foreclosure at substantial discounts but don’t know how to uncover title or debt to establish equity. I have taught hundreds of people how to make such purchases with minimal risk and cash through my hands-on foreclosure workshop. We were in touch earlier, and I want to keep you