Introduction to Learning From Worst Case Scenarios with Nelson Mullins, Part 3
Brian Seidensticker, CEO of Tax Sale Resources, recently hosted a four-part podcast series with Randy Saunders and Matt Abee of the nationwide law firm Nelson Mullins. Saunders and Abee are experts in tax sales law across multiple states. In this third installment, they share more knowledge about avoiding unwanted and unexpected outcomes to be more successful tax sale investors. Below are some of the questions and topics investors should know about in the podcast, with answers and insights to help avoid problems.
Does the Property Include a Mobile Home?
Many parcels have mobile homes on them, and in virtually every state, there are general rules regarding whether the home is still mobile or has become a permanent fixture on the land. For instance, if the wheels have been removed and a foundation built to support it, it may be considered fixed and part of the land. You may also encounter properties with both fixed mobile homes and those deemed not fixed. The issues for investors arise when the local statutes recognize a mobile home as taxed and titled separately from the land it is on – such that the investor may have a legal interest in the parcel but not the mobile home.
Problems That Can Entangle Investors
As the two attorneys strongly emphasize, before you invest in a property with a mobile home, you will want to know whether or not you have the opportunity to legally own the mobile home and the parcel where it is located. Otherwise, you may take possession of the mobile home only to discover that you have no ownership rights. Things often must be corrected when an investor mistakenly assumes that a mobile home belongs to them because they bought the parcel where it sits. They might rent it, sell it, haul it off, or destroy it. Then, suddenly, the actual mobile homeowner comes out of the woodwork and files a claim that can be very expensive for an investor to resolve.
How it Can Go from Bad to Worse
The legitimate owner of that mobile home could file charges or sue for all sorts of damages. Imagine, for example, that they had valuable, irreplaceable heirlooms or documents in the house. Removing someone’s property without permission is, after all, a crime of theft. What if they were deployed in the military or traveling for work, only to return home to find that their home had been removed and scrapped? Investors could find themselves on the hook for all sorts of legal and financial problems because they took what they wrongly thought were reasonable legal steps. Instead, they face a local judge who will likely favor the resident's rights and has little sympathy for an investor who bought a tax-sale property to make a profit and then impacted the mobile homeowner’s life in catastrophic ways.
Can It Get Even Messier?
But it can get worse. Many people who have mobile homes buy them using a loan, and the mobile home is the collateral that secures the loan. The lender won't be happy if you inadvertently interfere with that process by altering the house or moving it without permission or legal authority. You will likely face charges and lawsuits from the person who bought the home and their lender. In other words, you are now held liable for stripping the collateral the financing entity had in place. A terrible situation is now definitely a worst-case scenario with severe consequences for you as the investor, and it will likely cost you exponentially more than what you paid at the tax sale to acquire the parcel of land.
Statutes of Limitations
There are also statutes of limitations regarding the timeframe for taking possession of the property and evicting any people who may live there so that you can quiet the title. For example, Alabama has a 6-year statute of limitation, and the clock starts running on the tax sale date. If you fail to act within that timeframe, your interest in the property will become null and void, and you’ll be left with no recourse against the delinquent taxpayer or the county. That’s one of the states where you relinquish your right to foreclose if you miss the deadline because your lien is extinguished – as if it never existed.
Secondary Market Considerations
That timeline is particularly crucial when you buy on the secondary market because you could wind up buying without realizing that the statute of limitations is about to expire. So, part of your due diligence must be checking on that date to verify how much time is left. A worst-case scenario could arise if you trust the date when the tax deed was issued versus the date of the tax sale – which is the critical date. In that case, you may be misled into thinking you have X number of years from the date the deed was issued when, in fact, the timeline is based on when the tax sale was conducted.
Seek Expert Local Counsel from the Start
The scenarios outlined above are just some examples of your difficulties. But the good news is that an informed and qualified local attorney well-versed in local statutes and procedures can alert you to potential pitfalls. They may, for example, help with due diligence to determine if a mobile home is fixed to the land, if it is financed and used as collateral, who services the loan, and how to proceed. Reaching out to a local attorney can help you avoid time, effort, and money – and that value cannot be overemphasized.
The Bottom Line
Tax sales can offer many advantages and great opportunities for investors. However, it is essential to know what you’re getting yourself into, and a seasoned tax sales attorney in the jurisdiction can help you avoid unwanted outcomes. This is just an overview of the information and insights shared on the podcast with Brian Seidensticker by Randy Saunders and Matt Abee. Also, remember that there are four helpful podcasts in the Learning from Worst Case Scenarios series, and you can listen to all of them. To learn more and listen to this complete podcast, click here.
