Red Flags to Look Out for When Purchasing Tax-Delinquent Properties

Tax-delinquent properties can be a blessing and a curse for first-time home buyers. Sure, you may have negotiation power and be enticed to buy in by motivated sellers, but it’s always advised to enter into a sale with full knowledge of past real estate tax and what other issues you’re getting into.

While tax-delinquent properties may seem like a huge red flag for some, The Hegwood Group is here to state that it isn’t all bad. As long as you know the risks and steps you should take when purchasing said properties, you could find a home that’s a diamond in the rough.

Tax-Delinquent Properties Could Have Unseen Liens

The worst position you can put yourself in is beneath a home that is sitting on thousands of dollars in delinquent taxes. Keep your finances away from these issues by investing in title insurance as one of your closing costs. 

Title insurance protects your rights and ensures any property you purchase is clear of any liens once under your ownership. Our advice is to have this insurance when you know the home you want is “the one.” This way, the process of checking of liens will be complete before closing.

Missed a Lien?

Sometimes, without the help of a property tax consultant, liens can be overlooked in the discovery period. Fortunately, if you have purchased title insurance, liens on the property that were missed prior to closing will be taken care of through your title insurance. 

No Title Insurance? Prepare to Pay at Closing

If you don’t opt for title insurance you not only have to pay off the delinquent taxes at closing, but you are opening yourself up to vulnerabilities if further liens are discovered post-closing. Remember, liens are tied to a property, not an owner, so once you have your name on the title, anything financial involving the home is now your responsibility.

Prepare for Deferred Maintenance

Even though this isn’t related to tax services, we’d like to leave this tip for buyers that don’t know what they could be stepping into. Even if you have title insurance to cover delinquent taxes, you still run the risk of having to make excess repairs to the home. Much like properties involved with abatements, many of the homes that are categorized as tax-delinquent could come with deferred maintenance or code violations that are costly to repair.

Liens Eat Up Equity

Many real estate purchases are made under the promise that the home is an investment that will wind up with substantial equity in the end. Unfortunately, large tax-delinquencies can quickly decrease the property value of a home. Be wary of deals that seem too good to be true. These homes may suffer from more delinquent taxes than their actual value or sales price.

Keep Up With Your Property Taxes Through The Hegwood Group

Whether you are purchasing a distressed property or feel like you’re overpaying on your taxes and need help, The Hegwood Group is the Dallas property tax consultant firm you need to speak with. We have helped clients in the residential and commercial landscape, and are prepared to make sure your property tax concerns are met. Contact us today to find out more about our services.

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