My First Tax Deed Auction Purchase [Letter]

Do I just walk up, knock on the door and tell them you’re in my house? Start paying rent or leave? How well do you think that will go over?

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real estate investing pensacola fl

 

Like many states, Florida is a tax deed state, meaning, if you own the tax deed (or win it at the county tax deed auction), under FL Statue you have the right to take immediate possession. Most folks tend to purchase tax deeds where the property is unoccupied. I now understand why this can be an issue, but in my first experience, so far/fingers crossed, my first tax deed auction purchase was occupied and it has gone extremely well.

Quick Details:

  • Yes, this was my first tax deed purchase – Pensacola property in Escambia County
  • I did very little due diligence pre-auction (not good and certainly not advisable, I was lucky)
  • Mobile Home Trailer in a class C neighborhood
  • From several pre-auction drive byes, I could not tell if the property was occupied or not; a call to the utility company let me know power was being paid (of course they wouldn’t give me any details by whom)
  • Post Auction (After I paid for the property!) I discovered the occupying party was not on the title, he had lived there for 15+ years (discovered this from a Professionally paid title search – Always use a professional )
Being as it was my first tax deed auction purchase, the Pensacola property being occupied by an unknown entity, and my natural behavior to avoid conflict (especially one where I may be shot by Shotgun Sally), I didn’t know what to do. Do I just walk up, knock on the door and tell them you’re in my house? Start paying rent or leave? How well do you think that will go over?
A while back I posted about the importance of having a lawyer on your team and here is a great example of why. My first thought was just to evict the occupant. Per my lawyer’s advice, I cannot evict the current occupant as there is no lease agreement to evict on. This left me with 2 real options:
  • I can attempt to perform an ejectment notice – lengthier than an eviction and WAY more costly (estimated around $3,000).
  • Have the occupant sign a lease and become my tenant.

I like option B MUCH better. After all, supposedly this occupant had been there for 15+ years and clearly he was settled in by the looks of the place. It was going to cost me thousands of dollars to clean it up and even more to find a new tenant. But with the fear of being shot, how do I make contact to see if he’s open to it? Via a Certified US Letter, that’s how. And that’s exactly what I did.

Contact me via the form on this website or email [ jay@helmsREI.com ] and I’ll send you a copy of the letter I sent. 

Through the letter I explained and provided copies of the tax deed auction purchase, I was interested in keeping him as a tenant, but if he didn’t contact me within 10 days of receipt, I’d be forced to take legal action to remove him from the premises. In approx. 10 days he called me up, we worked out a deal and he signed a lease. This could not have went any better.

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Will I continue to invest in tax deed sales? Yes, but the next go round will institute more pre-auction due diligence. I really was lucky here. As a matter of fact, I placed bids for additional tax deeds in Pensacola the month immediately following this one, but did not win those auctions.

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Title Search: Should I Pay a Professional?

From my experience, absolutely 100% yes, a Title Search should be performed by a paid professional, every time. Furthermore, at closing, always, alwaysalways purchase title insurance. Title Insurance can save you thousands. For now I want to talk about why I will always pay a professional (lawyer, title search company, etc) to perform a title search.
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real estate investing pensacola fl


As always, I’m not a legal attorney and if you have title / deed questions, a legal attorney should be sought after. Consider this post for entertainment purposes only 🙂

I recently started inquiring to buy a property near downtown Pensacola, FL.  The property appeared to have been abandoned for years & in absolute horrible condition (the way we like them). I had my realtor touch base with the listing agent and I expected it would be a lost effort as the deteriorating Realtor listing sign in the front yard conveyed this opportunity had been around for a while. After a couple of weeks my realtor finally returned with very little feedback. “Title issues”, she said. That was it. In an attempt to save $100, I went off to perform my own title search. Surprisingly it came up clean (hence the reason I now will always pay the professionals to perform title searches). My realtor abandoned pursuing the deal with me so I went on to speak with the owner listed on the Escambia County Appraiser’s site. For the sake of this post, let’s call him Pensacola Bill.

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Over the next several months Pensacola Bill and I had many discussions and I learned a lot about the property.  This property was an heirloom passed from his deceased mother. Bill has been paying the taxes on the heirloom property for a few years, even though the property is abandoned and in horrible condition. He thought by just paying the taxes gave him 100% of the title. He eventually will be correct if he exercises something called Adverse Possession, but he’ll have to wait it out for several, several years to exercise this right. Bill and I finally agreed there were some unknown title issues and worked out a sales price for the property that included me paying for some of the legal costs to finally probate title the property directly to Bill. I had a ceiling of what I would pay and those legal costs will be deducted from the agreed upon sales price. Anything over that, Bill was responsible. As we dove deeper into the discovery phase, more items started to unfold to the degree that I became very uncomfortable moving forward – at least not until I understood everything better. Remember, when I did a title search on my own, it came back clean, one owner, property was Pensacola Bill’s.  A quick call to my Real Estate Lawyer and $100 title search later here’s what was discovered:

The heirloom property was actually titled to Bill and his two brothers. Unfortunately, Bill was the only one still alive. Because his brothers and brothers’ wives were also deceased without a will, their ownership of the property passed onto their children. Furthermore, each of the brothers, including Bill, had been married a couple of times. Each marriage resulted in at least one to several kids with each wife and some wives had children from previous marriages. Under Florida law, the ex-wives  (living or deceased) still have ownership in the heirloom property as long as they were legally married at the time the heirloom passed title to Bill and his brothers. If the ex-wifes were deceased, their ownership passed onto their children (including those from any previous marriage). As Bill and I started to add up the potential # of known dependents, that quickly totaled 27. Twenty seven individuals who would join the probate process, all of who had to agree to not only sale the property, but at what price. I know this is part of the probate process and something that needs to take place, but at this time I decided to not pursue the deal any further.

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Helping Pensacola Bill discover all that he didn’t know and give him some direction was truly educational and quite frankly, rewarding for me. Sure it may have cost me $100 and several hours of my time, but the probate costs alone were expected to be more than $10,000.  Bill and I have agreed to keep in touch in hopes that we can strike a deal in the future.

Bottom line, always pay a professional to do your title searches and always purchase title insurance. As in this scenario, it not only helped me save thousands of dollars but also allowed me to not get wrapped up into a deal where it would take potentially years before I was able to see any ROI.
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