Not long ago, in a blog post I shared about goals and my desire to finally make some progress in renovating my farmhouse. I started making slight progress, but somehow, every time I think I’ll really focus on it, something happens to distract my time, energy and money. This time was no exception.
First, I was hired to oversee the renovation of another old house in our community. I’m excited about the project and the new friendship being forged in the process.
Then, in a situation very similar to last year, my efforts have been further derailed by another house.
Yep. I bought another house.
This was the blog post I started writing a couple of days ago. The post went on to tell the story. How I talked with the owner months ago and she wanted too much money. How she called me last week and asked if I still wanted it, for $60,000 less. Yes!!
How the house was going to be auctioned as a foreclosure next week. We would have to move fast if we were going to close before the sale. But, then she was hospitalized and that delayed things and jeopardized the closing.
It told how everything seemed to be coming together finally. I’d delivered the signed contract to the title company and I was planning the rehab. The sellers were relieved to avoid foreclosure.
That was the post I started writing. That was the post I wanted to write. But the thing about real estate investing and foreclosures is that you have to expect the unexpected. It’s unpredictable, and a deal isn’t done until it’s closed.
This truth was hammered home again when the title company called. The owners owed back taxes to the IRS and the house had a $350,000 tax lien. They claim they don’t owe it, and honestly, it’s hard for me to imagine these people could possibly owe that much in back taxes.
But regardless, the issue will have to be addressed before I can buy the property. This means the lender will have to agree to postpone the foreclosure sale.
So for now, we are asking the lender for more time. If the lender is willing we may be able to deal with the lien, either by determining the IRS has the wrong guy (it happens), or petitioning the IRS to lift the lien to allow for the transfer of the property. They have a process for doing this, but it takes time.
One thing is for sure, this is a very good reminder of the importance of doing your due diligence when buying property. Not many people realize that when a property is bought at auction, the buyer may be purchasing more than just the house.
There are certain liens that survive and the buyer becomes responsible for those. In some instances, a junior lien holder such as bank that provided a second mortgage, will initiate foreclosure. If you were to purchase that home at auction, you would also be responsible for the first mortgage. Can you imaging buying a house at auction for $50,000 for instance and then learning you are also responsible for the $100,000 first mortgage?
And the thing is, a lien can be placed the day before a sale, making it very difficult to be 100% sure you’re getting a clean title.
These are the nitty-gritty, messy details that they never really talk about on Flip or Flop or similar shows. It can be risky business. You have to be very careful, very diligent and make no assumptions.
For now, thankful that I dodged that bullet, I’ll keep working with the seller. I’ll keep trying to help them avoid foreclosure, knowing much of it is out of my control. I’ll work with Susan, my new friend and client, to see that their new home is structurally sound, updated and beautiful. And maybe, just maybe, I’ll get a project or two around here completed.