EP 245 – Finding & Claiming Tax Overages

NCS 245 | Tax Overages

NCS 245 | Tax Overages


The note business is a longer running game that most investor think it is. You often need to check on your asset’s property values, property taxes and property title. This is the step where you are finding and claiming tax overages on your deals or potential deals. One of the things you need to focus on is if a tax sale took place between the person who is trying to sell a property to you. Learn how a tax sale happens and what you need to do if there’s a company versus a borrower’s name on the property.

We’ve got some great stuff we’re going to share with you that a lot of people overlook in the note business. A little niche that they know about to check on the front end for their own asset, but they don’t often don’t think about it in the long run, the longer game of things. What I’m talking about is finding him and claiming tax overages on your deals or potential deals that you may not even want.

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Finding & Claiming Tax Overages

We have our special guest from our WCN family, the man, the myth, the legend, our very own Greg Arcizo. How are you doing?


Before I bring Greg on and talk, Greg’s been handling this from when you started in the office for the most part, right Greg?

It’s one of my first tasks.

Greg, you’ve been with me for almost over a year and a half now?

Almost two years.

Obviously, everybody knows that they talk with us about due diligence and we’re always double checking property values, property taxes, and property title. Those are always the big three things. Two out of the three year you check on the frontend, the title, you pull on the backend. When we get a tape in and I throw the tape to you and you’re checking taxes, what’s a big red flag that you do when you’re checking taxes on note deals?

We’re trying to see if a tax sale took place in between the person that’s trying to sell it to us and us.

What’s the big red flag that throws it off right off the bat? If we’ve got a spreadsheet in with the borrowers’ names, what do you see when there’s something different?

If there’s a company name versus the borrower’s name on there. It should be deeded to the borrower, and if it’s deeded to an LLC or an Inc. Company, then probably a tax sale happened in between or even somebody else’s name.

That’s what Greg does. That’s one of the things that Greg is good at doing. He’s much better just checking taxes, we all know this. What I’m getting at is that one of the things that we often have done, and I’m guilty of this in the past too, is if we’re doing a search and we see the name change and we see that a sale took place, I go it went to a tax sale. That often nullifies the whole deal. If you take it one step further, you will often find money sitting out there ready to be claimed. Without giving away anything, you’ve filed how many claims for us over just the last couple of months?

Five probably.

Why don’t we rattle off the amount of the tax overages that you’ve claimed for us?

We just got one for $35,000. I might be going for $75,000. That’s probably going to take about three months to finish up but it’s in the works. I think we’ve had another $30,000 or $31,000 and I think a $20,000 check and one for $8,000. It ranges $8,000 to $75,000. That’s what we’ve got so far.

Most of these are on crappy assets. Greg has not seen some of these like the one that we just got in with on an asset that was maybe worth $30,000. It had a huge HOA lien on it that didn’t get wiped out. Let’s talk about what happens that lead to overages, you don’t know about this. This is what happens a lot of time. I know what the property’s worth because I’ve seen the property. Let’s just talk about the one we just saw here. It’s a condo. It needed work. It had been gutted. Zillow gave it a value of around $75,000, $80,000. It needed about a good $30,000 in repairs because of a new sheet rock, new plumbing, new wiring. I had seen it. We foreclosed on the deal. It was part of a pool of assets we bought. I’ve made our money back on the other assets. This is just a crappy condo in a rougher area of Orlando.

I know the taxes are coming up and I’m like, ”It doesn’t make any sense for me to drop $15,000 in back taxes on a single and come out, I’m really not going to make anything.”We kept an eye on it and lo and behold, we start getting phone calls. I get a phone call, “There’s a tax over,” and that’s what you have to realize. There are companies out there that all they do is they watch for tax foreclosures to see if there’s a tax overages. Now, what happens with tax overages? Let’s say three years of back taxes, and what usually happens is once a property has three delinquent years of back taxes, it’ll go for a tax sale. In some states they do a tax certificate for each year’s taxes are sold off for an interest rate. In fact tax certificate investors buy those up to get a flat return investment, and after three years they can then force it to go on a tax foreclosure.

In Texas, it’s a very popular aspect of investing in this tax sales here. In Florida, they do tax certificates. I know that the taxes that were owed on this one, it wasn’t worth me doing it. Let’s just take it for a loss and let’s see what happens at the tax sale. Lo and behold, it does. Somebody sees the address, they pull a Zillow value, they can’t get into the property, they do a drive by or walk around, they can’t get into the property and they say it looks pretty decent. What happens at most tax auctions these days, and Greg’s dad, David, is an investor and has done tax sales for years. He’s complained about the fact that things are getting over bid at the auction. It literally stops bid on $80,000 to $90,000, and make sense for a real estate investor. That’s what happens with a lot of tax auctions sometimes.

NCS 245 | Tax Overages

Tax Overages: If it’s a deed, they want the assignment chain that you have. Make sure it’s recorded.

If it looks like it’s a decent property, people overbid hoping that they’ll get the assets. Sure enough they get the asset, but they get a surprise. Thinking they not only have the assets. In this situation, somebody bid $42,000 on this asset. Somebody pays $42,000 at the auction, the county gets their $8,000 and the remaining proceeds of $34,000 in change goes to either the owner of the property or the first lien holder. In this case, we were the first lien holder on the asset. Greg, you have me walking in the office with a notice like, “Here Greg, go fill this out.” Let’s talk about that. I’d say, “Give a call to the county,” and you called the county, what department roughly are you looking for?

Usually in general, I just call for the Tax Deeds Department and they’re the ones who handle the sale. Each one has been different as far as what they titled it, but in general, when I say tax deed sales, everyone generally directs me to write a phone number. It’s usually one person. It’s pretty personal. It’s usually an attorney or a paralegal that you’ll end up talking to. Each county of course wants different information, but in general, if it’s a deed, they want the assignment chain that you have. Make sure it’s recorded. Sometimes they’ve asked for allonges, it depends. The most recent one, we actually foreclosed so they had titled the deed over to us, in that case we submitted the deed over to the paralegal. She examines it and make sure everything’s legit. For instance, the one that we’re having to wait 90 days on, they’re making sure that no one else comes in and claims on it. They would do further research, but they just have that 90-day period to make sure that there are no claims once it’s closed out. They process all the documents and ensure everything’s correct, then they’ll send in the checks to us.

A big point here that I want to make is when you call the tax assessor’s office, they’re not going to have the info if it did go over tax overages, they’ll just know if it went to tax sale or anything like that. They will often have to send you to a different department in the state or the county that handles those things. They’ll give you the tax deed number and they go over there. When you buy portfolios, there are some that are just crap, you’re not going to work on, it just is what it is at least when you’re buying bigger portfolios. If anything is over $500, we’ll file a claim on it for the most part. Otherwise, it doesn’t really make sense for the time when we get $100 overages and things like that. That doesn’t really make sense for us to do.

One of the great things that I have done over the years too, this is a note I want people to take in mind. When you’re getting spreadsheets, the important thing to do is if you see an asset you like and see they went to tax sale, make that one extra phone call. Pick up the phone like Greg does for us, “I saw this one at tax sale. Is there a tax overage? That was one of the first things that I had to do on a portfolio, was go through and “Did any of these go to tax sales or tax overages, which ones will you wipe off the books? Which ones do we need to file claims on?” It was basically was checking taxes on a portfolio. We were paying taxes and finding out a few of those lost, not a big deal. Those that had tax sales, great. We claimed on them and made money on this. Greg, it’s not a difficult process, right? What’s the name of the form that you’re filling out?

It’s different with each county, but usually Surplus Claim Forms are the ones that I’ve heard the most. Then another just thought that came to my head and it’s happened once, every now and then there’s a timeframe before it goes from the tax department to the general treasury of unclaimed funds. If it’s outside a year or two years and it hasn’t been claimed, it could be in the General Treasury Department. You’d have to ask them to transfer you over to that department to get a confirmation on what the funds would be. If you have a deed and it checks out, it still would be the same process.

That’s a very good point because usually after a year, the counties will then post it to the county’s unclaimed funds department. You’ll often find that unclaimed funds and things like that. I was doing a search of the day and found something on unclaimed funds where I had a $1,400 check waiting for me from Liberty Mutual on an insurance claim from ten years ago on a property that I fixed and flipped. An old cell phone bill that I paid too much on, there was $60 or something sitting around there, utility deposits. A lot of people will find unclaimed checks and stuff like that. This is why it’s important because we bought assets that I knew has gone a tax sale, but I asked for the seller of the note, “Throw this one in basically at nothing.”

It went to tax sale. I’ll try to sue on the mortgage. I’ll sue the borrower on the mortgage, trying to get something back, knowing that there’s a tax overages sitting out there of $9,000 or$15,000 or $20,000 that I can claim. There’s one state that’s a little honky with a tax overage where it doesn’t go to the next lien holder line. Indiana does it to the first person who claimed on the fund. It could actually be the borrower in the property that you’re the lender on. If they go and claim that overage before you do, they can actually have those proceeds given to them. It’s a weird thing. Gene Chandler informed us that a while back, so that’s the one thing you’ve got to act on the stuff. The beautiful thing is we have seen assets that we have bought that have pretty good overages just sitting out there that we were making money from the get go.

One of the $30,000 assets Greg worked, it was down in Leesburg, Florida. It’s an ugly piece of property. It was worth about $30,000 to $36,000. I think I paid $5,000for it. It needed repair, but it wasn’t worth putting the repairs in because the value in the days on the market were slow and cumbersome. What I did is a lot of the Florida Counties will list their auctions online and you can see what stuff is selling for. You often check out to see what bid is getting bid up, what’s not getting bid up. That’s what’s beautiful about Florida. Florida allows you to check this stuff. I saw this one, this little asset we had, part of a bigger pool, about 35 Florida assets. I said, “This isn’t worth me putting repairs into.”I talked to my attorney and I said, “Cameron, let’s just focus on bidding up the tax sale.”He’s like, “I can do that.” My attorney shows up before the tax auction.

NCS 245 | Tax Overages

Tax Overages: If you need to redeem the taxes, take the property back. If it doesn’t sell, you can pay redeemer taxes back in and get the property back in a clean title.

He’s bidding against people to a specific point, and then he drops off. I said, “If we get this thing sold at tax auctions for $10,000, $15,000, $20,000, I’m fine because I’m into this thing for $5,000.”He’s like, “Done.”He gets his bid up to $34,000, because somebody really wanted the property. The investor that paid $34,000.They were happy because they were buying it for the primary. They knew that it needed some work, but they were happy to do that. I was happy because, they will pay the taxes to the county office and I got a check for almost $30,000 after my attorney fees are paid, and I haven’t even put repairs into it.

One of the things that you might want to look at and this bailed me out in a couple of bad assets, too. I thought they were good and then I find out they are crap and you just wait for the tax sale. Not only will it clean up title for you in a lot of cases so you’re taking the property back, but if you’re in a state that has redemption timeframes and it forecloses out, it’ll not only clear up the title, but the light will come in. If you need to redeem the taxes, take the property back. If it doesn’t sell, you can pay redeemer taxes back in and get the property back in a clean title. I’ve used that in a couple of cases, almost was a quiet title to clear things up. What’s the timeframe for checks once you filed stuff?

About a month after they approve it. They’re really good about communication. Once it’s approved, they’ll say it’s going to be two weeks because our accounting department has to process it. My favorite one was in Duvall County. The lady that we worked with there handled everything. She gave me weekly updates. Sometimes the update was there was no update, but it’s still nice to hear that they’re still in the process of figuring things out.

We need to send paperwork three times in a week because it was off for something.

There were some issues, but we got it figured out and she was a lot of help.

The beauty of that asset is it is maybe worth $14,000. I paid $4,000 for that one. From the tax overages, how much on that one? That was $31,000. That worked out really well for a crappy little asset that need a lot of work that wasn’t worth much. We get the tapes in, what do we do? The idea here is if you’re getting a tape in and you’re looking to find this tax overage, it’s not to tip your hat. Make a bid that’s low but say, “This looks like it went to tax overage. Let me buy the note for a nickel.” or something like that. You never want to sell it and say, “There’s a $12,000 tax overage I’m going to claim.”They’re not going to play ball with you for the most part. We’ve seen it happen.

We were on a buying tour actually with Marc Gold a few years back, the Shadow Inventory Road Show in Indiana. We’re up looking for some assets, then we granted loan solutions to the seller, and they didn’t even know what’s a tax sale. We were up there looking, Gene Chandler was out with us on his phone and he was like, “This one has a tax sale on a$12,000 tax overage. Some idiot notified him, “I want to buy it because there’s tax sale” and then we’re like “No, we’ll just claim. We’ll just file the paperwork out and get back.” Now be careful, I said that you often run into some cases where there’s companies that’s all they do is track the stuff, and they’ll make a phone call to you, “We’ll fill the paperwork out and we’ll charge a 25%, 30%, 40%, 50% of the proceeds of the paperwork.” Greg, how difficult is the paperwork?

Even the counties will tell you. They’ll say, “I’m an attorney. I can fill this out.” The counties always respond with saying, you don’t need an attorney to fill this out. Anyone can fill it out as long as you’re a representative of the company or the owner of the property, you can fill out the paperwork out.

A lot of times when we’ve had some stuff where I’m filing, we just had to send in our articles of incorporation and stuff like that showing that we are in good standing. It’s not difficult. It’s simple forms. Do a lot of these people want you to mail the forms to you Greg or can you scan them in or email them to them?

It varies by county. Florida seems to be pretty modern as far as just scanning them and sending them in. Some want faxes and that’s the worst because we have to run over to FedEx just to fax stuff in. That hasn’t been the case, that’s only happened on two counties that I can think of. In general, it’s usually just over email, scanning documents and uploading them.

Can you scan it? You have on your side there are different ones that you’re following. There on your dry erase board?

We have one in Orlando, but it’s not out of the 90-day period. It’s $32,820 with the surplus. It probably sold for like $40,000 in the tax sale, but after they took their tax money out of it, there’s about $32,000 left to claim on it.

For those of you guys that are like, I don’t have a lot of money, I’m scared. If you’re literally getting a list in, that’s one thing that if you’re doing at night, you can often do it pretty relatively easy by just going to NETR Online and do a search and just seeing, was there a tax sale? Oftentimes, they list how much the sale was for, or the County Clerk will tell you how much it’s sold for and you’re going to have to go back and see on the tax record how much was owed and see if there’s a tax overage to it. I’ve done this in larger companies in the past where as we got a list in and we were searching through things, we saw a tax overage on counties, we contact them, “We’d like to buy the note on this one.”If it’s from the Bank of America, Chase or Citibank, it’s not worth wasting your time on. If you’re seeing smaller companies or entities or private individuals and they’re unclaimed, that’s an easy thing to reach out to say, “I want to buy that note or just there was a tax sale, I’d like to try to buy your interest in this one for pennies on the dollar.

NCS 245 | Tax Overages

Tax Overages: A lot of counties are not going to give you any extra information unless you ask for it but once you ask for it, they’re definitely helpful at that point.

Once it’s gone to tax sale, yes, you can no longer take the property back. It’s now an unsecured lien that you’re trying to collect on a credit card debt and things like that. There are debt buyers out there that’ll pay $0.05 of a dollar for that stuff because they’re just going after judgments and other funds that the borrowers may have. It’s an opportunity there, you’ll see some stuff. I have bought portfolios and say, hey, throw these five in for free. They went to tax sale, we’ll try to claim on this stuff and often, the funds are so big they don’t have the time to check every little detail. One, they don’t have a Greg in their office to make a phone call to traction things down. When you first did this, you were a little nervous about it, right?

Yeah, because I don’t know how many people have called a county, but they won’t tell you anything unless you ask for it. They’re not going to give you any extra information or help you. Back to the Duvall county, that’s how I got into a really good conversation with the paralegal there. She actually explained the whole process to me and told me what to ask for. Fortunately, she was really helpful and walked me through what the process looks like and what to ask for. I’ve noticed that a lot of counties are not going to give you any extra information unless you ask for it. Once you ask for it, they’re definitely helpful at that point, but they’re not going to say, “You need to do this and you need to ask for surplus claim form.” At first, that’s what I was asking. “Is there any paperwork we need to fill out?” They’re not going to give you too much information. The lady told me, “It’s the surplus claim form in Duvall County,” and so I go off of that now and have a script and I know what to ask for.

It’s a pretty simple one-page form most of the time, right?

Yeah. It’s about one-page or two pages.

Just filling it in with the entity and the dates and the APN numbers and the tax deed numbers. These are basically a paper trail for the Counties of who they issue checks to. We had one get claimed with one entity, and we wanted to get paid out in a different entity and then it just made the check out to a different entity of ours. Pretty easy to do. You may have different LLC, especially, I got some older LLCs from old stuff that we want to trade for over. It’s an easy thing. Greg had to do this earlier on, asking questions. I guide you a little bit of the way but every country is a little bit different. It’s not that difficult to figure out though and knock out. It’s always a good thing when Greg walks into my office, “I think I found $30,000.”

It’s never a bad day when that happens.

Little tricks that you guys can do in your local counties. Every county does tax foreclosures or does foreclosures of some sort, especially when it comes to property taxes. It’s often free to search and to bid on most tax foreclosure auctions, you’ve got to prove that you don’t owe the county any taxes, so make sure your property taxes are paid up to date for the most part, just to bid on that stuff. It’s free for you to look to see any tax overages, if anything took place. If it was overbid, then what was owed on the taxes? That’s usually your first starting point. This isn’t something I would not probably spend a lot of time on in rural counties. I would do it on your more popular counties, your bigger cities, your bigger states especially those that have gone up in value over the years. You’ll see this in your higher value property stuff that’s $70,000 or more.

You’ll see some tax overage in the low value assets, but most people know that low value assets are what they’re worth and whatnot. When you see that’s property is looking ugly, on a nice end block, that will often be a good sign for the most part in your local areas for stuff like that. An easy way to put some extra money in your pocket at a really cheap lead aspect of things. This has worked for us. We call the lender, usually a smaller lender or a smaller fund and offered to buy it out. It led to me getting on their buyers list for other assets. Keep that in mind as a possible aspect, as a lead gen source for you. If you are the buyer of the tax deed, and the country allows you to sell it, you’re getting a guaranteed decent return on your money. Sometimes it’s 5%, sometimes it’s up to 18%.

Other than all the information’s online because you can just Google it and go to the county website, like we use naturally. They have the tax deeds and what they paid for it. If they paid $40,000 in the tax sale, there’s probably surplus in it. They’re going to send that property to tax sale once there’s a couple of thousand dollars in overages. They’re not going to let it get too high, they’re not going to let it get $40,000 in back taxes. If you see a $40,000 sale, there are probably surplus claims in there. That would be it.

Greg, thank you so much for doing an outstanding job on this. This is why checking and doing the one little extra step often pays off in the long run. I know it’s disheartening, because we oftentimes get a little bit of the OTSC Syndrome, “Oh That’s So Cute,” where we get excited about the house, and the potential for the mod and we get upset when we see them in the tax sale. If you see what happen, and see if there are unclaimed funds out there, it’s still may work in your best interest and still make an offer on it. This went to tax sale a year ago, this went to tax sale six months ago, I’ll still buy the defaulted note for $0.05 or $0.10 on the dollar. It could still lead to being a really, really productive tasks when you’re looking at assets, especially in tapes that have been bounced around for a little while. You want to make sure you’re always direct.

NCS 245 | Tax Overages

Tax Overages: Every county does tax foreclosures or does foreclosures of some sort, especially when it comes to property taxes.

That’s still the most important thing. When you get to tape, make sure you’re not dealing with a daisy chain and things like that, but if you can find out, especially doing deep search and assignments, mortgage search, see your most recent lender is on that aspect of thing. If that note has been sold three or four times, I guarantee that the current note owner did not get a notice that the property was going to tax sale. It’s one thing to keep in mind. We’ve had that happen a few times with different people tells us, “It didn’t go to tax sale.” Then we track through the assignment change to find who they sold the note to and buy it directly from the person who may own it or may not. Keep that in mind when you’re looking at things.

Thanks for listening. Hopefully this was helpful. It’s just a little bit of an extra nugget for you and your note business. If people are looking for assets, or looking for deals, or looking for returns, it’s going to be a great little way to make some things happen. All you need is a decent one to make what most people make in a year. Other than that, go out and make something happen. One thing I want you to make a note on that Note Camp is literally 42 and a half days out. We’ve got a tremendous lineup just like every time, but we’ve gotten about a third of the speakers that are brand new this time around. We’re excited at Kathy Fettke is going to be speaking on there as well. Alan Cowgill confirmed with me too, one of the best in the industry about raising private capital. Mark Yuzuik, who’s a great friend. You’ll really enjoy his session on mental gain.

Still finalizing our two keynote speakers, but I’m pretty stoked. I’m waiting on a couple of people to get back with me to finalize their time and their dates available on that aspect. Go to NoteCamp.Live to get signed up. Tickets are still $197. It’s still available at the early bird price. Not the extra early bird, but $197 is still pretty damn cheap for four days and 30 plus speakers in pure content, actions, marketing and profit generating nuggets, figuring out business. Once again, April 5th through 8th, NoteCamp.Live. Take advantage now and you won’t regret it. Once again Greg, thanks for joining us.

Thanks for having me.

We’ll see you all at the top.


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