04 Aug Ep. 33 Land Tax Sales with Attorney Dale Sweet
In this episode Realtors Adam Kruse, Holly Laws, and Shannon St. Pierre interview attorney Dale Sweet from the offices of Jonathan P. Beck. Find out about some of the rules and regulations regarding land tax sales. Email questions to PODCAST@HermannLondon.com
0:50 Adam introduces Shannon St. Pierre, Holly Laws, and Dale Sweet
1:40 Dale’s office puts on free seminars about tax sales
2:25 Why would Realtors need to know about tax sales if they don’t get commissions
3:20 How do tax sales help to improve neighborhoods
4:34 What is a tax sale and how does a property end up on the list
8:52 Do tax sale properties have a mortgage
10:52 What are the 2 biggest tax sale myths
13:00 What is a quiet title
15:33 How expensive is a quiet title search
18:00 How can someone get on Dale’s free email list
18:55 How many tax sales are there every year
19:50 Is it possible to buy tax sales outside of the scheduled auction dates
21:20 Are the properties always empty
22:00 How do these properties get inspected and who handles evictions
25:00 What happens if a property is occupied by a renter already
27:55 At what point in the process does an attorney get involved
29:30 When is payment do at auction and what forms of payment are accepted
31:00 How to find these tax sale properties besides getting on Dale’s email list
32:20 Why is the street address misleading when bidding on tax sales
35:00 How does the mow to own program work
37:50 How is the opening bid determined
39:30 Why isn’t the opening bid closer to what the property is actually worth
40:25 What happens to the extra money after the property sells
42:00 What happens if the original owner comes back (right of redemption)
46:34 At what point does the winning bidder actually own the property
50:00 Is it common for the original owner to get the property back
58:00 Dale’s number one piece of advice for someone who has never done a tax sale
59:45 Why do properties come off the list at the last minute
1:03:08 Who lives under Dale’s roof
1:03:15 Where is Dale at his best
1:03:31 Favorite blog or podcast
1:03:48 What is Dale’s guilty pleasure
1:04:02 Who is Dale’s mentor and how has he thanked them
Adam-Welcome to the podcast live from Hermann London in Maplewood. We are excited for episode 33 all about tax sales in St. Louis city and county. We have few guests here. We have Shannon St. Pierre and Holly Laws. Both of them are Realtors, investors, and city residents and they have a lot of questions for Dale Sweet with the Law Offices of Jonathan Beck. We brought Mr. Sweet in because other people told me you are the expert at tax sales.
Dale-There are a handfull of us who know about this process. I’m don’t claim to be an expert but I’m delighted to be here.
a-You put on seminars about tax sales.
d-From time to time our law offices have a seminar at least once a year. Our last one was back in April.
a-If a Realtor is listening they are probably wondering why we would be talking about tax sales since there are no commisions involved. You don’t nomrally use a Realtor for tax sales but I think it’s important for our listeners to know at Hermann London we care about educating our Realtors and clients about real estate. Hopefully if someone buys a property with tax sale, they will update the property and use us to sell it, lease it, or manage it.
d-You can advise your clients about what they can expect in this particular neighborhood. It may be adventageous to consult a Realtor.
a-We could tell them what it’s worth and the best use of it. Do you have an intro about yourself?
d-I have to tell you that representing litigants with some roll of a tax sale is what I do for a living. I can also tell you I have a political agenda. In demystifying the tax sale process I show people how to buy property and thereby improve our neighborhoods. When property languishes abandoned for many years and people are unwilling to bid on it because they don’t understand the tax sale process the St. Louis region suffers.
a-I appreciate that. I’ve been in real estate for 12 years and every time I see my brother he tells me we need to buy property in tax sale but nothing comes of it. The other day my electrician was telling me. Someone has to learn about this so here you are. Let’s give a little bit of the behind the scenes. What is a tax sale?
d-Real estate taxes is a form of taxation like sales tax or income tax. A property owner of real estate in Missouri never has any personal financial responsibility to pay the taxes. The property pays the taxes. If I don’t pay my taxes for real estate I can’t get sued by the government the same way that I can if I don’t pay my income tax. My paycheck will not be garnished. In order to collect delinquent taxes, the government has come up with a number of different systems to sell the real property or in some cases sell a lien on a real property in order to collect the back taxes to keep the schools going and so on. A lot of our laws in the U.S. come from England and one example is in Agrarian England, the farm itself pays the rents by the crops that came from the ground, so I guess the corollary is the property is paying the taxes not the individual that owns it.
a-You mentioned before we started there is big difference between tax sales and the city and the county. I’m guessing it all starts the same though.
d-In the state of Missouri we have 3 different systems. The city uses one, most counties use a second, and Kansas City uses a third. The process starts with the taxes being delinquent. In Missouri our taxes are do on New Years Eve. On January 2nd after the government reopens after the holiday, they could be suing and selling people’s property. In practice, the government usually waits 3 years of tax delinquency before the process starts but there are exceptions.
a-If someone doesn’t pay for 3 years, the property ends up on a list and at the tax sale. How do they end up on the list and how do we find them?
d-Mostly we are going to be talking about the St. Louis metropolitan area on the Missouri side. Illinois uses a different process. In the city of St. Louis when the taxes are 3 years delinquent, for example if 2013, 2014, and 2015 go upaid, in 2016 the collector of revenue for the city will sue the property. The style of the lawsuit is collector vs parcel of property. If the taxes do not get paid following that court case then the sheriff will sell the property the following year in 2017 to satisfy the judgement. In St. Louis, Jefferson, Franklin, and St. Charles county, if the taxes are not paid for 3 years then the property is sold the following year for the back taxes or rather a liens on it.
a-Do properties end up on the tax sale only if they don’t have a mortgage?
d-Most mortgage companies escrow tax payments and insurance in order to protect their security interest. They have a security for payment on the loan. Some of the smaller banks and owner financed deals do not include a feature where taxes are escrowed. We also have situations where a property was eligible for foreclosure but for some reason the bank has not foreclosed or taken title of the property because they don’t want to be responsible for building code violations, liability, or condo dues. There are cases of properties selling that are ecombered by a mortgage.
h-If they do have a mortgage does the tax lien supersede it? Is it in first position before the mortgage?
d-The answer is yes but there is always room to litigate or I wouldn’t have a job. When the collector has a lien that is foreclosed upon, everyone else down the chain is wiped out. This does invoke some constitutional principles and gets complicated from time to time.
a-That’s one thing that scares people off because they are not clear whether they are paying for just the property or other liens and debts. Is that where you come in?
d-Sure. There are two myths that generally involve the tax sale. The number one myth is that if you buy a property for back taxes you are going to be so sorry and the liens are extraordinary. In general, when a tax sale is handled properly by the government, purchaser, and purchaser’s attorney, in general, all liens are wiped out with the exception of federal tax liens and those can usually be taken care of with a quiet title lawsuit.
h-I have investors who are interested in buying property in the city because inventory is low. I’ve told them they need to make sure it’s marketable title when they are done. I have a client with 2 empty lots that were bought at tax sale 12 years ago. I wanted to make sure it was insurable before building $300,000 house and they said they are able to insure after 2 years. I advise people to investigate doing a quiet title suit so they have clear marketable title.
d-You are bringing up a matter of title insurance underwriting standards as it meets law and so as a matter of law the title might be clear but title company A might have a different opinion than company B. It’s sort of like saying State Farm will insure your house with knob and tube wiring while All State will not.
a-Can you define quiet title?
d-A quiet title lawsuit where a plaintiff who has some connection to real estate asks a court to determine whether their title it better than anyone elses. They are frequently used following a tax sale to shore up whatever deed flowed from the tax sale. In the case of a tax sale generally we have chain of title. Buyer sells to seller and seller sells to buyer and it keeps on going and all the sellers have signed a deed to the property. In the case of a tax sale the deed is coming not from the tax payer or the former owner but rather the collector of revenue or sheriff, and because of that break in the chain, title insurance companies are apprehensive. A quiet title is a lawsuit following the tax sale in which the tax sale purchaser asks to court to declare that the title they have gotten is better than anyone else named in the lawsuit. The purchaser will sue the former owner not for money but just to have the judge decide who owns it. Anyone with a lien would also be named defendants in that lawsuit. The likely outcome is the court finds that the tax sale purchaser has better title than everyone else.
h-I know a lot of people are frightened by the cost of a quiet title suit.
d-They are expense heavy files. We have to send sheriff’s deputies to find people in other states, advertise the property, recording fees, and publication, but in general following a St. Louis tax sale we can get a quiet title done in matter of months for something in between $1,000 to $2,000.
a-Is all the research done after the bid?
d-When people ask what their diligence should be prior to the tax sale I’d say that is where the Realtors would come in. It’s figuring out the after improved value and what the comps are like in that zip code.
a-If someone is going to do all that research ahead of time it seems like they would know if a property has something like an $80,000 lien on it.
d-Assuming everything happens correctly, the lien should be extinguished by the operation of law in the tax sale. Sometimes it takes a while for the lien-holder to accept that but that’s generally the case.
a-Let’s tell people how to contact you.
d-Our office is near Tower Grove Park on Magnolia Avenue. The phone number is 314-772-2889. I also have a free email list that folks can get on. I spam people. It’s only 5 or 6 messages a year when a tax sale is coming up and we want to provide a list of what the sheriff is selling. I also provide geo-coded apps. Call the offices and spell your email address twice and ask to be put on the list.
Holly-I think this is a good time to ask how many times are there tax sales?
d-The city of St. Louis has 5 a year and has for the last 40 years and those are in May, June, July, August, and October. In St. Louis county there is only 1 per year and it always begins on the 4th Monday in August.
a-You can buy properties from the county outside of that sale, right?
d-You can. In the city we don’t have a right to redeem which is the other scary myth. There is no right to redeem, that is, the tax payer can not pay the taxes and take the property back. The first or second time the collector of revenue in the county there is a 1 year right to redeem. The third time the collector of revenue sells a property in the county there is a much shorter right to redeem and if the property has not sold in 3 consecutive tax sales it is offered for sale at any time and without a right to redeem.
a-Someone didn’t pay their taxes for 3 years and then the next year it goes up for tax sale and it doesn’t sell for 3 more years, you can go to the county and buy this vacant property?
d-Some of them are occupied.Sometimes there are tenants renting but the property owner is not paying the taxes
a-What’ the condition of there properties? A year ago I drove by some near me and one was vacant but another had a family in it having a party. What would I have done with those people? Do you evict the people? Do I ever get to see the property ahead of time?
d-The first one is how do I inspect these properties. We are dealing with land tax sales. The government is selling you land. It doesn’t matter if there is a pile of gold bricks, a cash-flowing rental property, or a pile of garbage bags, you get that free with the land. These are buyer beware situations. There is no way to check out the keys but some purchases peer in windows, knock on doors, bring cookies and introduce themselves and explain the situation. There is no reason to admit these people to the property though. There are success stories too though. Many of our clients are successful at making the occupants their tenants. There are people that make their mortgage payment for years and when the house is paid off they don’t have the chunk of change at the end of the year to pay the taxes or repair things. Sometimes those are very good tenants to have. Every situation is unique. When tax sale purchasers plan to have a full rehab and can’t have people living there, cash for keys is always a desirable humanitarian option where folks have a little extra money to use for a security deposit on a new place and they will leave the property faster and in better condition.
Shannon-If they are not an owner-occupant but actually a tenant, are you legally responsible for giving back their security deposit?
d-In these situation usually you are not dealing with a lease or security deposits but I’ve not seen any case law where the new owner has to pay the deposit.
s-So they are out that money?
d-They need to contact their former landlord for that money.
h-Do you have to do a formal eviction?
d-In the city of St. Louis an occupant that will not leave and won’t sign a new lease can be removed the tax sale process without filing an additional landlord/tenant lawsuit.
a-Does that mean I’m going to call you anyway to check out my title so now you can evict them while you are at it? It’s like a tax sale eviction?
d-I’m first going to ask if you’ve tried cash for keys and when all else fails I go back to court for a second time. The first time is to get the sale confirmed and the judge’s seal of approval. The second time is to get the eviction.
s-You come into this process after the property has been acquired?
d-Before we get to that, in St. Louis county it is not a court related proceeding until after we get to the quiet title. At what point in the process do I get involved? Generally after they’ve been a successful bidder at the auction. As the tax sale approaches and everyone is reading about them, people will call the office with 5 minute questions. This is a good point to say that I’m talking in general and not providing legal advice.
h-What are the modes of payment and how soon do you have to come up with it.
d-It’s the same day. Someone who is bidding doesn’t want to bid beyond the amount of liquid cash they can come up with that day or they risk being banned from future sales and being subject of a collection action of the government because the property sold to someone for even less. Cash is always king. Cashiers check is usually faster. Money order is also accepted. Some people bring a bank roll with a rubber band around it and other people just go to the bank to get a cashiers check and come back. It depends on the jurisdiction what time the payment must be made but it’s always promptly the same day.
a-Is your email list the best way to find out about these properties?
d-These properties are usually listed in a legal newspaper and the only people that read them are Citibank and lawyers. Now that we’re in the internet age, the government lists things on their websites so that is stlouisco.com and google St. Louis city sheriff land tax sale and you’ll find the list for the properties. In some of the rural counties they are not on website but rather in the local newspaper. 32.07.
a-I do have 5 questions I like to ask every guest. Who lives under your roof?
d-Another human being and 3 cats.
a-Where are you at your best?
d-I wish I could say in the courtroom. Maybe Karaoke.
a-What’s your song?
d-Goodbye Earl. I do Tom Jones too.
a-Do you have a favorite blog or podcast?
d-I like the St. Louis Realtor Podcast. I also look at these urban explorer websites with vacant buildings.
a-Do you have a guilty pleasure?
d-Chocolate from the freezer and whole milk.
a-Who is your mentor and how have you thanked them?
d-My 6th grade teacher once told me that interpersonal relationships are the only reason to stay alive and when we are in the real estate business we are dealing with interpersonal relationships. I ran into that 6th grade teacher recently and I did thank her.
a-Thank you to all of our guests; Shannon St. Pierre, Holly Laws, and Dale Sweet from the law offices of Jonathan P. Beck. Take care.