Transcript:
Welcome to the Tax Sale Podcast, where tax sale investing is made easy.
I’m Casey Denman, a tax sale veteran, the author of the tax sale playbook, founder of the tax sale academy, the leading tax sale expert and trainer and your host right here on the tax sale podcast.
Thanks for joining me on today’s podcast. This podcast is provided completely free to help teach you about tax sale investing and is made possible through The Tax Sale Academy. If you’re looking to learn about tax defaulted real estate, in a comprehensive, step by step basis then head to TaxSaleAacdemy.com and click on join. Again, taxsaleacademy.com and click join.
On today’s podcast episode we’re talking about selling your tax sale properties. In order to make money you must sell, rent or otherwise use that asset. The most common way my students make money is through selling, so this is a pretty important topic, right? Now, I want you to understand that there is quite a bit to selling real estate, especially tax sale properties, so this episode is more so to open your eyes to show you the possibilities.
I routinely get comments that indicate viewers aren’t aware of these possibilities. So, hopefully this episode provides a few new angles to help you out.
The first thing we must discuss are the title issues. I have an episode on this topic so we aren’t going to go into lots of detail, but for more information be sure to review episode 19. Simply put, properties that go through tax foreclosure have clouds on the title. This means that the title to the property can’t be insured without additional action. Title insurance is the insurance typically provided to the purchaser of real estate that insures them against any claims of title. In short, everything in that chain of title is perfect and they guarantee there are no issues.
As mentioned, this can’t be offered on tax foreclosures without additional effort. So, to get title insurance you must perform a lawsuit to quiet the title or you must go through the tax foreclosure certification process. Both of these will allow you to get title insurance – the title insurance will allow the buyer comfort knowing the title is clear, they can finance the property if necessary since lenders require title insurance, and you’ll be able to get the most amount of money. Of course, clearing the title comes with a typical expense ranging from $1-3,000. This is an important topic that ties in closely with selling, so keep this in mind.
Ok, so back to selling – there are two ways to sell in my opinion. We have conventional methods and unconventional methods.
Let’s start with conventional methods. These are the types of selling approaches that you’re probably used to and are very common. We’re talking about advertising properties locally as FSBO or For Sale By Owner or listing with Realtors. Then the transaction closes through a title company or real estate attorney who performs a title search and issues title insurance – you know, where everyone goes to a fancy office, signs a stack of papers, congratulates each other and eats cookies. When you see properties for sale, conventional selling methods and closings are most commonly what you’ll see.
As mentioned, title insurance is also expected and very commonly used for conventional closings. So, these methods are only suitable for properties that have had the title cleared, which means that you must have budgeted for that expense pre purchase.
That’s the industry’s expectation of selling and is what most people think of. It’s what everyone is familiar with.
So to sell conventionally, just list the property with a realtor, or handle it as a FSBO, send it to a closing company or attorney, show up, sign the docs and cash the check.
On the opposite end of the spectrum we have nonconventional selling. This is where you’ll sell the property with its title in as-is condition. This means you don’t have the expense or time involved in clearing a title. In other words, you’re providing no guarantee on the chain of title and any issues are transferred to the buyer along with your owner of the property.
Now, before I move forward I want you to understand what types of properties this works best for. This will work best for low dollar properties and/or those with tremendous upside for the buyer. In other words, you’re giving the buyer such a good deal that they will take the responsibility of any title issues, and they’ll clear that title themselves in the future if desired. The risk for them is worth their reward. You’re simply providing a quit claim deed selling your interest in the property.
Please understand that buyers spending $500,000 want title insurance and the traditional process we previously discussed. They want something to back up their investment that insures them against any potential issue. And at that price point, you should certainly have the room in your budget to just go ahead and clear the title and sell it conventionally. And even at $15,000, $10,000 or perhaps even $5,000 depending on the buyer, they could very well want title insurance. So you must factor the expense in getting that insurance into your initial bid amount.
But if you’re buying low dollar properties, especially you all just starting out, it will often be cost prohibitive to clear a title and get insurance. I routinely sell low dollar properties with quit claim deeds and with as-is titles. If I can buy a property for $250 and sell it for $1500 I will do that all day every single day. In many areas this is not only possible, but it’s the norm. And the truth is that I’d rather do this than have to deal with ten different people to get something closed – the realtor, the realtor’s assistant, the closing coordinator, the title agent, attorney, it can get ridiculous at times.
In order to sell through non conventional methods you must be marketing the properties correctly. First off, a property without a title insurance policy is not as valuable as a property with a title insurance policy. There are issues there that affect the value. So, your property MUST be priced significantly less than a comparable property with title insurance.
Another point is that listing with a Realtor is not possible – most won’t waste their time unless you can provide a clear title. And listing yourself is possible but you have to understand that sticking a FSBO sign in the yard usually comes with the expectation of a traditional closing unless you clearly market it otherwise.
So our attention goes back to the internet. This provides you with the ability to market properties to a large audience in a manner that easily demonstrates your intentions to future buyers. Whether you sell through Craiglist, eBay, Facebook Marketplace or anywhere else, it’s rather simple to add a line or two to let a potential buyer know that the property does not come with title insurance but is priced accordingly.
Find your buyer online, handle the closing yourself or hire an attorney to prepare a quit claim deed and then you’re finished.
As you can see there is a time and place for every method of selling. I’ve sold plenty of properties in a conventional manner. I’ve also sold plenty of properties in a nonconventional manner. Such a big part of your business will be determining well in advance how you’ll be reselling the properties based on the values. If it’s needs title insurance, then budget for it and sell it conventionally. If it doesn’t or it’s cost prohibitive based on value, then don’t get it and sell it in a nonconventional manner.
A big reason I recorded today’s episode is to remind you that there are many ways to make money in this business. Just because it’s not what you specifically are used to, doesn’t mean it’s not possible. Do some research, investigate what others’ are doing, figure out how you can apply it to your business and most importantly always be a student. The successful investor is the investor who never stops learning.
That’s it for today’s episode.
I really hope you’ve found this episode helpful and that you are enjoying my podcast. If you are, please consider taking just a few minutes out of your day to leave some positive feedback on whatever platform you’re listening to us on – we truly hope we’re able to play a small role in your tax sale success.
Thanks again for joining – if you’re looking to learn from us directly, just head to taxsaleacademy.com. Again that’s taxsaleacademy.com – there’s a link in the show notes.
Take care!