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Corrected: Owner Occupied Tax Sale Properties

Posted by 15789465 on

Some corrections didn't get saved in my earlier post on this topic. Please read this version, instead. It's more clear on some points. I'm going to repeat this until everybody pays attention. NEVER take the advice of Revenue Commission clerks who tell you to lay low, and not set foot on your tax sale property, until after you get your tax deed. That advice is not only wrong, it's dangerous. Assuming the tax sale was not void for some reason (more below), then you are entitled to take possession as soon as you get your certificate. You are allowed to use the property, change the locks, work on it. You are allowed to rent it out and keep all rents you collect, even if the owner later redeems.  Most importantly, the owner's three-year redemption "clock" does not start ticking down until you've taken possession of the property. If you never set foot on the property until after you get a tax deed, then the owner has three years from THAT date to redeem. What good is your deed?  It is a teddy bear designed to comfort you at night, but basically worthless if the boogie-man shows up. Why might a tax sale be void? The two most common reasons are (1) owner died before the tax sale and (2) owner sold to someone else or was foreclosed upon before the tax sale. You can't protect yourself from everything, but you can usually do some research and find out if either of those two things has occurred. So, back to the topic of this post, owner-occupied tax sale properties.  If you buy a tax sale property and discover it is owner-occupied, how do you take possession?
  1. You can have them legally kicked off the property. That is done with an ejectment lawsuit filed in Circuit Court (NOT an eviction lawsuit).  You cannot file the suit until at least six months after the tax sale. It's probably going to end up being expensive and long. I don't recommend going this route unless the property is an incredible deal that's worth the risk and expense. .
  2. You can bluff them out by waiting six months and then advising of the tax sale. You can say something like, "The tax sale was six months ago, but under the law I had to wait until now to have you evicted...."  You can say the word "evicted" here even though it's not technically correct, because the goal is for the owner to understand you have the right to kick them off the property. Using words like "ejectment" just causes confusion. Everybody understands "Eviction." .
  3. You can do the bluff in item 2 above, but say you don't really want to kick people out of their homes. Perhaps the owner would sign a lease with you until they are able to redeem. Maybe something as low as $25 a month (or whatever you think the market will bear.)
The goal of #3 is to get them to sign the lease. Once they sign the lease, it is the same as them saying, "You, tax sale investor, have legally taken possession of the property, and I acknowledge that my possession is only under you, not in my own right."  No court has ruled on this tactic, so I'm not 100% sure it will hold up as starting the clock on the redemption ticking down. But, I think it will. Sure, they intend to eventually redeem from you. But they might not. It would be nice if that redemption clock were ticking down while they tried to get their money together. Folks, anybody can plunk down money on the tax sale roulette table, and hope they win. If you are going to win, and win consistently, you need a strategy. Good strategy depends on understanding the rules (like the possession/redemption thing) and using tactics that overcome obstacles presented by the rules (like having the owner-occupant sign a lease).  Keep reading my blog posts, and coming to my seminars (unabashed plug there!) and you'll be able to implement winning strategies.

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  • Howie, Have you filed an ejectment action?

    Greg Stanley on
  • Howie, you are exactly right regarding the need to demand possession and then wait six months. Thanks for bringing this to my attention. The statute says, “Any purchaser of lands at a tax sale other than the state or anyone claiming under him shall be entitled to possession of said lands immediately upon receipt of certificate of sale from the tax collector; and, if possession is not surrendered within six months after demand therefor is made by said purchaser or his assignee, the said purchaser or his assignee may maintain an action in ejectment or a statutory real action in the nature of ejectment, or other proper remedy for the recovery of the possession..”

    Denise L. Evans on
  • from what i’ve seen, no matter what you do your tax deed only serves a purpose similar to a “teddy beer” – it is issued by a probate judge who has no equitable jurisdiction (except possibly jefferson and mobile counties) and shou;d not have jurisdiction to determine title.

    it is evidence of the fact of the tax-sale purchaser and 3 years of tax payment

    title passes to the valid tax-sale purchaser after 3 years by operation of law

    unfortunately it appears as though a purchaser doesn’t have color of title until 3 years after the tax-sale – therefore the right of redemption of the taxpayer isn’t extinguished until the purchaser occupies the property, or otherwise takes adverse possession, for 3 years after 3 years after the tax sale – a total of at least 6 years – therefore taking possession during the first 3 years is of no effect

    also we might want to notice that ala code 40-10-74 seems to say that the purchaser has to first make demand of possession on the taxpayer before waiting 6 months to file for ejectment – as opposed to waiting 6 months before notifying the taxpayer of the sale

    howie on
  • Mesne profits go to the title holder—the person with the tax deed. Before that, you are only entitled to take possession, you are not entitled to mesne profits.

    Denise L. Evans on
  • not to belabor a point, but in the ejectments you mentioned the judge awarded mesne profits to holders of tax deeds – what about hplders of certificates of purchasers during the first 3 years

    howie on

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