How can real estate be bought for just pennies on the dollar?
John Beck's proven Amazing Profits tax deed and tax lien education teaches people how to buy properties for just pennies on the dollar. Sometimes people wonder how this is possible. This FAQ is written to help everyone understand exactly why John Beck's Proven tax deed and tax lien program is so valuable-because it teaches you how to profit from the little known and poorly understood real estate segment known as tax sale auctions.
To understand how it is possible to buy properties for just pennies on the dollar, you must first understand a little bit about liens, lien position and foreclosure laws. When someone buys a property, they often will go to a bank to borrow the money to pay for that property. This loan is known as a mortgage. The bank making the loan will file a lien against the property in the amount of the loan. This gives the bank leverage over the owner of the home because the owner cannot sell the property until the lien has been satisfied or cleared.
Sometimes a person will get more than one loan on their property. For example, if the property is worth $100,000, the person might have a $70,000 first mortgage and a $20,000 second mortgage. The difference between the first mortgage and the second mortgage is determined by chronological order of when the lien was filed at the county recorder's office.
Filing a lien is a very important part of the transaction for the banks because it gives them leverage over the property. A lien gives the lien holder (the bank) certain rights if the owner of the property decides to stop making the mortgage payments. These rights include the right to foreclose on the property.
When a bank forecloses on a property, they go through a very defined legal process of evicting the current owner of the property (the person who took out the loan) and taking ownership of the property. To make a long story short, a lien holder has the right to take possession of the property and sell it to get their money back.
All lien holders on record (at the county recorder's office) have the right to take possession of the property or initiate the foreclosure process. However, the value of this legal right diminishes if one is not in first position.
So let's take our earlier example of the $100,000 home. In this instance, let's just say the owner decides to quit making mortgage payments and defaults on his loans. Both the first and second lien holder of record have the right to foreclose on the property because the owner has defaulted on the payments.
If the first lien holder decided to foreclose on the property, they could force the owner out of the home and take possession of the property and sell the property for just enough to satisfy their own loan. They wouldn't have to worry about the second lien holder and wouldn't have to satisfy the debt of the second lien holder at all. This is known in the industry as "wiping out the second" or "foreclosing off the second" lien holder.
Now the situation is a little different for the second lien holder. The law very clearly states that the second lien holder has the right to foreclose the owner off the property and take possession of the property, but because there is a more senior lien (a lien with a date of filing before the date the second lien holder filed), the second lien holder must satisfy the claims of the first lien holder by paying that lien holder in full before they can take ownership of the property.
This is why mortgages in first position have cheaper interest rates-they have the security of knowing they can foreclose any other debt off the property and obtain ownership of the property for just what they are owed. This is also why second position liens (second mortgages) are more expensive because they are taking a bigger financial risk if the owner decides to default on the payment.
So how does this help us understand why it is possible to buy properties for just pennies on the dollar? It's easy. The law gives any taxing authority the right to file a lien against a property when the owner of that property decides not to pay taxes. That's right. When someone decides not to pay taxes, the local taxing authority will file a lien against the property at the local county recorder's office.
However there is just one difference when a lien is filed by a taxing authority. The law gives the local taxing authority the right to first claims against that property to satisfy the tax debt on that property no matter when this lien is filed. So, in our example, the first lien holder filed their lien in 1999 and the second filed it a few years later. If the local taxing authority decided to file lien at a date later than the first or second lien holders filed, that lien would still take priority or be in first position because it is a tax debt.
What this means is that no matter what chronological order the tax debt lien was filed, the local taxing authority has the right to foreclose on that property without regards to or without worrying about paying off any other lien holder. That's right, the local taxing authority can wipe out the other lien holders by foreclosing on the property and selling that property at a tax auction for just what they are owed-back taxes, interest and penalties.
Now think about your property. What is higher, the value of your property or the taxes you pay every year on that property? If you are like every other person living in America, you will know that your property is valued much higher than the dollar amount you pay in taxes every year by a substantial margin.
So in our previous example of the $100,000 house, we already know the owner is currently carrying $90,000 total debt on the property or in other words has a total Loan To Value (LTV) of 90% on the property. Let's just say the property is taxed at a rate of $1,000 each year but that the owner has stopped paying their taxes and that that local taxing authority has filed a lien against the property and initiated the foreclosure process.
Let's further say the local taxing authority does foreclose on the property and wipes off all the other liens in the process. Now that local taxing authority has decided to sell that property at auction to get back its money. The law sets clear guidelines preventing these local taxing authorities from profiting from the sale of foreclosed property (to prevent any conflict of interest that might otherwise arise) so the local taxing authority will list that property at tax auction for just the value of the back taxes owed plus any interest and penalties accrued during the foreclosure process.
For easy math let's just say the total cost to pay off the back taxes and all penalties and interest is as high as $5,000 which the winning bidder does within a few hours of the tax auction. What this means is that the winning bidder was able to pay just $5,000 for a house that is worth $100,000.
If you do the math, you will see that the winning bidder paid just 5 pennies for every dollar of value they received when they bought the house! By now you are probably asking if this is really true. Well, it is. Mae O. bought a house at an Oklahoma tax auction and she paid just $240.03 for a house the county values at $49,556. This means Mae purchased the home for just ½ penny on the dollar for every dollar of value that property represents!
Deals like this happen every day. People stop paying their taxes on their properties every day and every year literally thousands of properties just like this go on sale at local tax auctions from around the country.
John Beck's proven tax lien and tax deed system teaches you exactly how to get your share of the profits this section of the real estate market represents.and you don't even need to get a real estate license!
So turn to John Beck, the world's foremost expert with over 30 years of experience to teach you exactly what you need to do to find these gems at tax auction and start making your financial dreams come true. Don't let a lack of knowledge ripoff your future or scam your earning potential. Make your dreams happen by learning how to make your money in the lucrative and ever rising real estate market.
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