Woman owes 15k in taxes. County forecloses and sells for 40k profit, and keeps the money. Court says "cool".

[Gil Bang 26057]

 

[TKthunder2 4999]

Follow up tweet:

The reasoning depends on a Minnesota statute that mandated the forfeiture of the property ahead of the sale, which the court says abrogates any common law right to the surplus equity, so the effect of this won’t extend beyond Minnesota absent similar state laws.

[Pato del Muerto 52635]

Pretty sure this is how it is in Texas too. The property is given as payment.  Whatever the governing body does with it, it’s all theirs.  Might even be the same for HOAs here. Unless laws have changed, they can foreclose ahead of first lien position as well. 
 

its a cousin to the scam whereby a home is foreclosed on by the county for nonpayment and then they do everything they can to hide the pending auction and sell the property for next to nothing to a family member in the know. 

Edited February 27, 2022 by Pato del Muerto

[Guest]

I guess she had no mortgage debt. I have no issue with this. If you get to the point where a governmental body or bank / creditor has to take legal action via foreclosure / sale to recoup what they’re owed, you’ve given up your right to any excess proceeds. It happens in the private sector; I’m not sure why a governmental body can’t keep proceeds as well. She forfeited her right. She should’ve sold the property on her own and she’d be $25K richer. 

[bschoolprof 6273]

Seems kinda like bullshit, but she also FAFO, so meh.  

[Enchubben 5512]

43 minutes ago, Porterhouse said:

I guess she had no mortgage debt. I have no issue with this. If you get to the point where a governmental body or bank / creditor has to take legal action via foreclosure / sale to recoup what they’re owed, you’ve given up your right to any excess proceeds. It happens in the private sector; I’m not sure why a governmental body can’t keep proceeds as well. She forfeited her right. She should’ve sold the property on her own and she’d be $25K richer. 

Or ya know, paid her fucking property tax.

[Brew 3049]

Pretty sure that’s standard isn’t it? Locally, you can buy properties for the tax debt and if the debtor doesn’t pay it within 12 months you own it.

[aggie08 21561]

Count me in as assuming this is standard operating protocol. If you get shit taken away from you to cover a debt, you don't get to keep the profit if they opt to sell said shit. It's no longer yours.

[CHIEF 5095]

There is no reason for any property to go into foreclosure at this time. I can't imagine anyone is "upside down" in any mortgage in America. Sell that shit, if you can't afford it, take the profit and buy a cheap travel trailer. Pay for a hookup and live on a family member's property. If you get foreclosed, 90% of the time, you are just lazy.

CHIEF

[Guest]

2 hours ago, Enchubben said:

Or ya know, paid her fucking property tax.

Yeah, well, she couldn’t afford it. And she wasn’t smart enough to sell, collect $25K in net proceeds, and go live with a relative or rent an apartment. 

[Guest]

1 hour ago, CHIEF said:

There is no reason for any property to go into foreclosure at this time. I can't imagine anyone is "upside down" in any mortgage in America. Sell that shit, if you can't afford it, take the profit and buy a cheap travel trailer. Pay for a hookup and live on a family member's property. If you get foreclosed, 90% of the time, you are just lazy.

CHIEF

Yes, but this wasn’t a mortgagor. It was the county foreclosing for unpaid property taxes. Another solution would’ve been to get a $15K mortgage at a really cheap rate, assuming she’d qualify. There are literally a dozen different roads she could’ve taken but she’s clearly financially illiterate, which is worse than being illiterate. 

[Bookman 4642]

In Texas, if the foreclosure proceeds are more than the debt, then the debtor gets the excess proceeds. I can't imagine any legal theory where the creditor gets to keep more money than what is owed.

If the house increases in value after the foreclosure sale and is later sold, then the debtor doesn't get any of that gain.

[UT_OB1 2225]

3 hours ago, Pato del Muerto said:

Pretty sure this is how it is in Texas too. The property is given as payment.  Whatever the governing body does with it, it’s all theirs.  Might even be the same for HOAs here. Unless laws have changed, they can foreclose ahead of first lien position as well. 
 

its a cousin to the scam whereby a home is foreclosed on by the county for nonpayment and then they do everything they can to hide the pending auction and sell the property for next to nothing to a family member in the know. 

Incorrect. Excess above owed plus fees go to previous owner. 

2 hours ago, Brew said:

Pretty sure that’s standard isn’t it? Locally, you can buy properties for the tax debt and if the debtor doesn’t pay it within 12 months you own it.

Not in Texas. 

1 hour ago, aggie08 said:

Count me in as assuming this is standard operating protocol. If you get shit taken away from you to cover a debt, you don't get to keep the profit if they opt to sell said shit. It's no longer yours.

Nope. 

6 minutes ago, Bookman said:

In Texas, if the foreclosure proceeds are more than the debt, then the debtor gets the excess proceeds. I can't imagine any legal theory where the creditor gets to keep more money than what is owed.

If the house increases in value after the foreclosure sale and is later sold, then the debtor doesn't get any of that gain.

Correct 

[Bookman 4642]

I just skimmed the opinion. That is a terrible statute, in my opinion, because it's an unfair penalty. I'm no constitutional lawyer, but they didn't seem to argue equal protection.

[Bookman 4642]

3 hours ago, Pato del Muerto said:

Might even be the same for HOAs here. Unless laws have changed, they can foreclose ahead of first lien position as well.

I haven't done foreclosures in 10+ years, but in my experience it was extremely rare for an HOA to have a lien with priority over a purchase money lien. The one time I saw it the HOA subordinated its lien as a condition of making the loan.

I can't imagine a bank making a loan on a house and being behind the HOA's lien.

[Brew 3049]

17 minutes ago, UT_OB1 said:

Incorrect. Excess above owed plus fees go to previous owner. 

Not in Texas. 

Nope. 

Correct 

Not located in TX, here and other states I have properties in that is the way it works. 

[Pato del Muerto 52635]

16 minutes ago, Bookman said:

I haven't done foreclosures in 10+ years, but in my experience it was extremely rare for an HOA to have a lien with priority over a purchase money lien. The one time I saw it the HOA subordinated its lien as a condition of making the loan.

I can't imagine a bank making a loan on a house and being behind the HOA's lien.

All property owners' associations can foreclose on an assessment lien using a judicial foreclosure. A judicial foreclosure requires a property owners' association to file a petition for foreclosure with the district or county court (depending on the amount of money owed) where the property is located.  Once a judgment has been issued, Texas Rule of Civil Procedure 309 authorizes a sheriff or constable to seize and sell the property to satisfy the judgment.

When the option is available, many property owners' associations will opt to choose a non-judicial foreclosure (see the box below) instead as it is a much faster process than a judicial foreclosure.
 

https://guides.sll.texas.gov/property-owners-associations/assessments-foreclosure
 

I think that’s the relevant link and excerpt. Though it doesn’t state whether or not the HOA assumes first position in the foreclosure with their assessment lien, so I don’t know how much risk a lender assumes. 
 

also doesn’t state who gets the excess proceeds. But my biggest beef is that an association can foreclose over hundreds of dollars owed- and doesn’t care if they get fmv for there to even be excess proceeds. 

Edited February 27, 2022 by Pato del Muerto

[Bookman 4642]

1 minute ago, Pato del Muerto said:

All property owners' associations can foreclose on an assessment lien using a judicial foreclosure. A judicial foreclosure requires a property owners' association to file a petition for foreclosure with the district or county court (depending on the amount of money owed) where the property is located.  Once a judgment has been issued, Texas Rule of Civil Procedure 309 authorizes a sheriff or constable to seize and sell the property to satisfy the judgment.

When the option is available, many property owners' associations will opt to choose a non-judicial foreclosure (see the box below) instead as it is a much faster process than a judicial foreclosure.
 

https://guides.sll.texas.gov/property-owners-associations/assessments-foreclosure
 

I think that’s the relevant link and excerpt. Though it doesn’t state whether or not the HOA assumes first position in the foreclosure with their assessment lien, so I don’t know how much risk a lender assumes. 

Yeah and the buyer at the foreclosure sale takes subject to the bank's lien.

[Bookman 4642]

Pull out the covenants, conditions, and restrictions for your house and you'll see a clause where the HOA subordinates its lien.

[Pato del Muerto 52635]

20 minutes ago, Bookman said:

Pull out the covenants, conditions, and restrictions for your house and you'll see a clause where the HOA subordinates its lien.

Gotcha. Doesn’t apply to me as I don’t live in an HOA at this time.  Just a general aggravation I have with HOAs and their power. 

[Bookman 4642]

4 minutes ago, Pato del Muerto said:

Gotcha. Doesn’t apply to me as I don’t live in an HOA at this time.  Just a general aggravation I have with HOAs and their power. 

Lol yeah, I don't have an HOA either and I'm thankful for it.

But they can serve their purposes. I represented an HOA for a rich neighborhood and they did a good job taking care of things.

[Guest]

1 hour ago, Bookman said:

In Texas, if the foreclosure proceeds are more than the debt, then the debtor gets the excess proceeds. I can't imagine any legal theory where the creditor gets to keep more money than what is owed.

If the house increases in value after the foreclosure sale and is later sold, then the debtor doesn't get any of that gain.

Perhaps in residential real estate. Not in commercial foreclosure scenarios. And I don’t agree with the debtor receiving excess proceeds in any event, whether a home or not. 

[Bookman 4642]

2 minutes ago, Porterhouse said:

Perhaps in residential real estate. Not in commercial foreclosure scenarios. And I don’t agree with the debtor receiving excess proceeds in any event, whether a home or not. 

Say in Texas you had a commercial first-lien debt of $1 million secured by property worth $2 million, and $700,000 of subsequent liens, mechanic's liens, judgment liens, etc.

If the foreclosure proceeds are $2 million, who gets that money, and how much do they get? When I did commercial foreclosures, the first lienholder would get $1 million, all the other liens would get paid off, and the owner would get the remaining $300,000.

Do you think that's an unfair result? If the owner doesn't get the excess $300,000, who should get it? Do all the other lienholders get to chop it up pro rata? Or does the first lienholder get it all? Maybe the foreclosing attorney should get to put it in his pocket.

[Dahobbs 17704]

41 minutes ago, Bookman said:

Say in Texas you had a commercial first-lien debt of $1 million secured by property worth $2 million, and $700,000 of subsequent liens, mechanic's liens, judgment liens, etc.

If the foreclosure proceeds are $2 million, who gets that money, and how much do they get? When I did commercial foreclosures, the first lienholder would get $1 million, all the other liens would get paid off, and the owner would get the remaining $300,000.

Do you think that's an unfair result? If the owner doesn't get the excess $300,000, who should get it? Do all the other lienholders get to chop it up pro rata? Or does the first lienholder get it all? Maybe the foreclosing attorney should get to put it in his pocket.

Yeah, I really don't understand any legal or equitable theory that would have the result be any different. @Porterhouse talking out of his ass per usual. 

[TwiceHorn 31597]

5 hours ago, Pato del Muerto said:

Pretty sure this is how it is in Texas too. The property is given as payment.  Whatever the governing body does with it, it’s all theirs.  Might even be the same for HOAs here. Unless laws have changed, they can foreclose ahead of first lien position as well. 
 

its a cousin to the scam whereby a home is foreclosed on by the county for nonpayment and then they do everything they can to hide the pending auction and sell the property for next to nothing to a family member in the know. 

Not true.  If the sale covers the taxes and costs of foreclosure, and any other liens on the property, the former owner gets the surplus.  Tex. Tax Code 34.021 and 34.03.

 

[po elvis 2083]

3 hours ago, Porterhouse said:

Yes, but this wasn’t a mortgagor. It was the county foreclosing for unpaid property taxes. Another solution would’ve been to get a $15K mortgage at a really cheap rate, assuming she’d qualify. There are literally a dozen different roads she could’ve taken but she’s clearly financially illiterate, which is worse than being illiterate. 

I googled her and she is at least 92 right now. Her family convinced her to move out of her condo in 2010 because of neighborhood crime and she moved into an apartment in a better place. In 2015, her condo was seized because she hadn't been paying taxes on it. Knowing nothing about her family, I could see an old woman doing this. 

[Bookman 4642]

5 hours ago, po elvis said:

I googled her and she is at least 92 right now. Her family convinced her to move out of her condo in 2010 because of neighborhood crime and she moved into an apartment in a better place. In 2015, her condo was seized because she hadn't been paying taxes on it. Knowing nothing about her family, I could see an old woman doing this. 

And apparently the state took her shit for her mistake. And a similarly situated taxpayer with no equity in her condo doesn't have to pay that penalty.

It's a crazy statute. Can't believe it's constitutional.

[Guest]

14 hours ago, Bookman said:

Say in Texas you had a commercial first-lien debt of $1 million secured by property worth $2 million, and $700,000 of subsequent liens, mechanic's liens, judgment liens, etc.

If the foreclosure proceeds are $2 million, who gets that money, and how much do they get? When I did commercial foreclosures, the first lienholder would get $1 million, all the other liens would get paid off, and the owner would get the remaining $300,000.

Do you think that's an unfair result? If the owner doesn't get the excess $300,000, who should get it? Do all the other lienholders get to chop it up pro rata? Or does the first lienholder get it all? Maybe the foreclosing attorney should get to put it in his pocket.

The creditor should get all excess proceeds after attorney fees. However, your hypothetical isn’t typical. Oftentimes, a creditor needs to take over a property via foreclosure, appoint some third party to manage it / clean it up, and wait for sunnier days. In that circumstance, the creditor should absolutely reap any excess profits. 

[Bookman 4642]

6 hours ago, Porterhouse said:

The creditor should get all excess proceeds after attorney fees. However, your hypothetical isn’t typical. Oftentimes, a creditor needs to take over a property via foreclosure, appoint some third party to manage it / clean it up, and wait for sunnier days. In that circumstance, the creditor should absolutely reap any excess profits. 

Why should the creditor get all the excess proceeds? What if there's more than one creditor?

And creditors don't "take over the property via foreclosure." You're confusing the creditor with the buyer at the foreclosure sale.

[Dahobbs 17704]

6 hours ago, Porterhouse said:

The creditor should get all excess proceeds after attorney fees. However, your hypothetical isn’t typical. Oftentimes, a creditor needs to take over a property via foreclosure, appoint some third party to manage it / clean it up, and wait for sunnier days. In that circumstance, the creditor should absolutely reap any excess profits. 

Wait a minute, so, you think the bank that owns your note should be able to sell your house and keep any excess in the event of nonpayment? Are you fucking insane? I mean, fuck, you could owe 1 dollar on a credit card. Do you really think failure to pay means that they should be able to put a lien on your house, foreclose, and then reap the profit? Your views are in no way connected to the law in 90% of the United States (basically absent this one weird statute, which I still think is unconstitutional). 

Also, see above. You don't know what foreclosure is. 

Edited February 28, 2022 by Dahobbs

[Guest]

3 hours ago, Bookman said:

Why should the creditor get all the excess proceeds? What if there's more than one creditor?

And creditors don't "take over the property via foreclosure." You're confusing the creditor with the buyer at the foreclosure sale.

You’re thinking in terms of residential real estate only. I’m extending it to 363 sales. I’ve dealt with many foreclosures, corporate and consumer. 

2 hours ago, Dahobbs said:

Wait a minute, so, you think the bank that owns your note should be able to sell your house and keep any excess in the event of nonpayment? Are you fucking insane? I mean, fuck, you could owe 1 dollar on a credit card. Do you really think failure to pay means that they should be able to put a lien on your house, foreclose, and then reap the profit? Your views are in no way connected to the law in 90% of the United States (basically absent this one weird statute, which I still think is unconstitutional). 

Also, see above. You don't know what foreclosure is. 

See above. You’ve got a hard on for me, like your wife. My fault for extending the conversation beyond single family homes. But really I have little issue with what happened here, or I suppose the 10% of the US. 

[Dahobbs 17704]

59 minutes ago, Porterhouse said:

You’re thinking in terms of residential real estate only. I’m extending it to 363 sales. I’ve dealt with many foreclosures, corporate and consumer. 

See above. You’ve got a hard on for me, like your wife. My fault for extending the conversation beyond single family homes. But really I have little issue with what happened here, or I suppose the 10% of the US. 

You don't understand how 363 sales work if you think creditors get to take an asset and keep anything in excess of the debt. It is true that once the sale is complete, if the asset increases I'm value, the creditor can fully benefit from that increase. But that isn't because creditors automatically get to keep excess. It's just because the transaction has already been made. It would be the same if no debt were involved. 

If an asset were to be sold at a 363 auction for above the amount of a debtor's debt, then the excess goes back to the debtor, not to any creditor. It would just be an odd occurrence since having assets in excess of debts would generally preclude participation in bankruptcy. 

Edited February 28, 2022 by Dahobbs

[Bookman 4642]

57 minutes ago, Porterhouse said:

You’re thinking in terms of residential real estate only. I’m extending it to 363 sales. I’ve dealt with many foreclosures, corporate and consumer.

Why do you think I'm thinking in terms of residential real estate only? After the financial crisis, I spent two years doing nothing but commercial real estate loan workouts, including many multi-million dollar single asset real estate Chapter 11 cases. I put literally dozens of real estate developers into bankruptcy. think I know what I'm talking about.

[Bookman 4642]

1 hour ago, Porterhouse said:

I’ve dealt with many foreclosures, corporate and consumer.

If you do this for your job you should learn how they work.

[Dahobbs 17704]

1 minute ago, Bookman said:

Why do you think I'm thinking in terms of residential real estate only? After the financial crisis, I spent two years doing nothing but commercial real estate loan workouts, including many multi-million dollar single asset real estate Chapter 11 cases. I put literally dozens of real estate developers into bankruptcy. think I know what I'm talking about.

He doesn't understand bankruptcy. He is applying his limited understanding of what happens in bankruptcy (creditors tend to get everything) and applying it outside that context. He doesn't understand why the creditors get everything or how those rules work. 

[Guest]

50 minutes ago, Dahobbs said:

You don't understand how 363 sales work if you think creditors get to take an asset and keep anything in excess of the debt. It is true that once the sale is complete, if the asset increases I'm value, the creditor can fully benefit from that increase. But that isn't because creditors automatically get to keep excess. It's just because the transaction has already been made. It would be the same if no debt were involved. 

If an asset were to be sold at a 363 auction for above the amount of a debtor's debt, then the excess goes back to the debtor, not to any creditor. It would just be an odd occurrence since having assets in excess of debts would generally preclude participation in bankruptcy. 

 

46 minutes ago, Bookman said:

Why do you think I'm thinking in terms of residential real estate only? After the financial crisis, I spent two years doing nothing but commercial real estate loan workouts, including many multi-million dollar single asset real estate Chapter 11 cases. I put literally dozens of real estate developers into bankruptcy. think I know what I'm talking about.

 

44 minutes ago, Bookman said:

If you do this for your job you should learn how they work.

 

44 minutes ago, Dahobbs said:

He doesn't understand bankruptcy. He is applying his limited understanding of what happens in bankruptcy (creditors tend to get everything) and applying it outside that context. He doesn't understand why the creditors get everything or how those rules work. 

I do understand BK; I’ve lived and breathed it for the past 7 years. There've been several insistences whereby I’ve worked out a situation where a creditor owns/controls an asset, contracts out a manager to cut costs/enhance value, and wait. The creditor always profits from a subsequent sale because the debtor is long out of the equation. 

The reason I assumed Bookman was limiting scope to single family foreclosures is because that’s what this thread is about, and the above paragraph describes situations steps beyond that. 

Edit: on the bolded part above: of course. My experience has always been there’s a very valid reason they’re in Ch 11 (or 7), and a credit bid occurs whereby creditor thinks it’ll stand a very good chance of recouping value with different management and time. 

Edited February 28, 2022 by Porterhouse

[Bookman 4642]

If the creditor owns the property, then the creditor purchased it at the auction and there's no more debtor/creditor relationship, at least with respect to that property. It's possible the creditor took control by order of the bankruptcy court but I've never seen that in the Southern District of Texas.

[Dahobbs 17704]

7 hours ago, Porterhouse said:

 

I do understand BK;  

No, you don't. Everything you're talking about is post sale. Of course the purchaser of an asset gets to benefit from any increased value of the asset after the sale. That's how it works for anyone, on any sale. It has nothing to do with bankruptcy or debt.

What the original post is about is not where the county purchases the asset at an auction, fixes it up, and then sales it for a profit. Rather, the county essentially forced a sale of the asset because of the unpaid tax lien. The purchaser of the asset paid more than the value of the debt. And the county kept all of the money even though it never purchased the property because of an incredibly crazy statute. It doesn't work that way anywhere else in the US. 

It seems like you're confused because in a 363 sale, a secured creditor can bid at auction based on how much debt is owed the creditor. It's just a nice way for the creditor to make a bid without throwing down cash. If no one else makes a higher bid, the creditor purchases the asset in exchange for the debt owed to it. It now owns the asset and can do whatever it wants with it. But it no longer owns the debt and can't collect from it further in bankruptcy. 

Edited February 28, 2022 by Dahobbs

[Guest]

21 minutes ago, Dahobbs said:

No, you don't. Everything you're talking about is post sale. Of course the purchaser of an asset gets to benefit from any increased value of the asset after the sale. That's how it works for anyone, on any sale. It has nothing to do with bankruptcy or debt.

What the original post is about is not where the county purchases the asset at an auction, fixes it up, and then sales it for a profit. Rather, the county essentially forced a sale of the asset because of the unpaid tax lien. The purchaser of the asset paid more than the value of the debt. And the county kept all of the money even though it never purchased the property because of an incredibly crazy statute. It doesn't work that way anywhere else in the US. 

It seems like you're confused because in a 363 sale, a secured creditor can bid at auction based on how much debt is owed the creditor. It's just a nice way for the creditor to make a bid without throwing down cash. If no one else makes a higher bid, the creditor purchases the asset in exchange for the debt owed to it. It now owns the asset and can do whatever it wants with it. But it no longer owns the debt and can't collect from it further in bankruptcy. 

You have an odd way of insult then immediate lecturing of very basic shit. Useless conversation. 

[Dahobbs 17704]

4 minutes ago, Porterhouse said:

You have an odd way of insult then immediate lecturing of very basic shit. Useless conversation. 

"No, you don't" isn't an insult. It is an objective statement of fact based on your posts in this thread. You've been wrong about basic shit. I don't have a way to correct that without explaining the basics. 

[Guest]

16 minutes ago, Dahobbs said:

"No, you don't" isn't an insult. It is an objective statement of fact based on your posts in this thread. You've been wrong about basic shit. I don't have a way to correct that without explaining the basics. 

I haven’t been wrong about anything. Your semantics use is off the charts.  

Edited February 28, 2022 by Porterhouse

[Dahobbs 17704]

8 minutes ago, Porterhouse said:

I haven’t been wrong about anything. Your semantics use is off the charts.  

Dude, there aren't special commercial rules on this. You are wrong at a very fundamental level. A creditor, generally, cannot force the sale of a property and then collect any proceeds in excess of the debt. Those go back to debtor. If the creditor actually purchases the property at auction, then yes, the creditor can later sell for profit (or a loss, however the market goes). 

Edited February 28, 2022 by Dahobbs

[TwiceHorn 31597]

7 hours ago, Bookman said:

If the creditor owns the property, then the creditor purchased it at the auction and there's no more debtor/creditor relationship, at least with respect to that property. It's possible the creditor took control by order of the bankruptcy court but I've never seen that in the Southern District of Texas.

Yep, and that probably means that no bid in excess of the debt was received at foreclosure.  The or a secured creditor made a credit bid equal to the amount of indebtedness and won the auction.

So Porterhouse isn't talking about the proceeds of a "foreclosure sale," but rather what happens subsequently.

And, bankruptcy sales, whether trustee-directed or 363 are not a very good analogy for foreclosure sales under a mortgage or deed of trust, because generally the debtor in a bankruptcy doesn't get to keep any excess value.  Probably also true in a multi-creditor foreclosure sale.

Edited February 28, 2022 by TwiceHorn

[Doc Reeves 6434]

On 2/26/2022 at 7:16 PM, aggie08 said:

Count me in as assuming this is standard operating protocol. If you get shit taken away from you to cover a debt, you don't get to keep the profit if they opt to sell said shit. It's no longer yours.

Exactly.

Property forfeiture to a bank sucks, but it really, really sucks when its to the state. Lots of ragey stories out there and we aren’t even touching  eminent domain.

Peoples lives are fairly complicated so it’s difficult for one person to criticize the payment habits or debt situation of another without lots of info, but basically my experience has taught me the best way to deal with this problem is to try really, really hard not to get in debt in the first place. Easy to say, not so easy to do depending on how crazy your life is. Some of the most responsible and money minded people I’ve ever known have found themselves in some unfortunate debt situations after divorces, death, or serious accidents. 

[TwiceHorn 31597]

On 2/26/2022 at 6:52 PM, Brew said:

Pretty sure that’s standard isn’t it? Locally, you can buy properties for the tax debt and if the debtor doesn’t pay it within 12 months you own it.

In Texas at least, the taxing unit is required to conduct a foreclosure sale in the form of a public auction.  The minimum bid in such an auction should be the amount of indebtedness, so yeah, theoretically you can acquire a $200k property for pennies on the dollar.

As a practical matter though, such sales tend to attract a lot of bidders and the ultimate sale price may be pretty close to FMV, and certainly not pennies on the dollar (closer to 80-90 pennies on the dollar, at least).  At least that is true in the populous counties.  In more rural places, foreclosures may go more unnoticed.

However, there is a right of redemption in Texas on a tax foreclosure, but not on most private party foreclosures.  So that makes a tax sale somewhat risky for the purchaser, and may mean that it doesn't attract bids the way a private party deed of trust foreclosure would.

 

[Guest]

1 hour ago, Dahobbs said:

Dude, there aren't special commercial rules on this. You are wrong at a very fundamental level. A creditor, generally, cannot force the sale of a property and then collect any proceeds in excess of the debt. Those go back to debtor. If the creditor actually purchases the property at auction, then yes, the creditor can later sell for profit (or a loss, however the market goes). 

Who are you addressing here?  Which post?

[Dahobbs 17704]

4 minutes ago, Porterhouse said:

Who are you addressing here?  Which post?

You. 

On 2/26/2022 at 6:06 PM, Porterhouse said:

I guess she had no mortgage debt. I have no issue with this. If you get to the point where a governmental body or bank / creditor has to take legal action via foreclosure / sale to recoup what they’re owed, you’ve given up your right to any excess proceeds. It happens in the private sector; 

 

On 2/26/2022 at 10:09 PM, Porterhouse said:

Perhaps in residential real estate. Not in commercial foreclosure scenarios. And I don’t agree with the debtor receiving excess proceeds in any event, whether a home or not. 

 

20 hours ago, Porterhouse said:

The creditor should get all excess proceeds after attorney fees. However, your hypothetical isn’t typical. Oftentimes, a creditor needs to take over a property via foreclosure, appoint some third party to manage it / clean it up, and wait for sunnier days. In that circumstance, the creditor should absolutely reap any excess profits. 

 

10 hours ago, Porterhouse said:

You’re thinking in terms of residential real estate only. I’m extending it to 363 sales. I’ve dealt with many foreclosures, corporate and consumer. 

None of these are correct. There are no special rules on this for commercial properties. It is the same rule: the debtor keeps excess proceeds from a foreclosure sale. You are confused because (1) you're talking about bankruptcy where the debt will almost always exceed the value of the sale at auction and (2) you're talking about the a subsequent sale after the property has already been transferred in the foreclosure auction. 

When a foreclosure happens (or a 363 sale), there is an auction. At that auction, anyone, including the creditor(s) can bid on the asset. If the asset are sold at the auction for an amount in excess of the debt, the debtor gets the excess proceeds. What happens after the auction has nothing to do with the debtor or the debt. The new owner, whether it is a creditor or not, is free to sale the asset for more than it paid for it and keep the increase in value. 

[Dahobbs 17704]

On 2/26/2022 at 7:16 PM, aggie08 said:

Count me in as assuming this is standard operating protocol. If you get shit taken away from you to cover a debt, you don't get to keep the profit if they opt to sell said shit. It's no longer yours.

 

1 hour ago, Doc Reeves said:

Exactly.

Property forfeiture to a bank sucks, but it really, really sucks when its to the state. Lots of ragey stories out there and we aren’t even touching  eminent domain.

Peoples lives are fairly complicated so it’s difficult for one person to criticize the payment habits or debt situation of another without lots of info, but basically my experience has taught me the best way to deal with this problem is to try really, really hard not to get in debt in the first place. Easy to say, not so easy to do depending on how crazy your life is. Some of the most responsible and money minded people I’ve ever known have found themselves in some unfortunate debt situations after divorces, death, or serious accidents. 

That isn't what happened here. The property was still hers. In general, your shit isn't taken away until AFTER the foreclosure sale. That's the event that transfers ownership from the debtor to the new owner. If the foreclosure sale goes for less than the value of the debt, the debtor gets nothing (and still owes money). If the foreclosure sale goes for more than the value of the debt, the debtor gets that excess proceeds, the creditor gets the money it is owed, and the purchaser gets title to the property (and is free to go and sell it for more if he/she can). Here, the county did the foreclosure sale and kept everything even though it was in excess of her debt and even though the county didn't have title to the property. That's nuts. 

[Nice Guy Eddie 13529]

Odd Minnesota law and it sounds like there have been different court decisions related to similar laws. Hopefully this gets solved by SCOTUS.

Always sad when older people really screw up their finances. My mom is in late 70s, and the most complex financial transaction she can do is buy on Amazon. If she didn't have assistance, I can't imagine how screwed up somethings would be.

The woman in question said that she had to move out of her condo, and couldn't afford both her tax bill and her new rent. She opted to pay the rent only, ultimately leading to this problem. We can only guess why she didn't sell especially when the tax debt was probably more manageable.

Edited February 28, 2022 by Nice Guy Eddie

[Doc Reeves 6434]

59 minutes ago, Dahobbs said:

That's nuts. 

Yep, it’s not fair.

Didnt mean to tangent off topic and thanks for bringing me back to the point. My dad was on the City zoning committee for our town while I was growing up for years. From a lot of stories I’ve heard from him, the county can pretty much do whatever the fuck they want because issues like this will just go to county court who will side with the city. Then, debtors rarely have the ability to appeal to a court that cares. 

In this case the county just acted like they had the title when they didn’t. Then when somebody cried foul they were like “fuck you, you debtor.” It’s a scam and the people without money to fight it get fucked. 

This issue has to do with money of course, but really more centrally what cases like this have to do with power and legitimate authority.  It’s fucked, but just the fact she was a debtor is a huge mark on her back for the city to fuck her.