|MUST READ: Tax Foreclosure Sales in Texas - Updates To Texas Law!
Regular Session of the 78th Texas Legislature passed some changes
to tax law as it relates to tax foreclosure sales. These changes were constitutional
amendments and can now be found in the Texas Constitution. The majority of
these changes will have little effect on your investment strategy and your
success. This is especially true if you follow the techniques provided in
my course, Texas Houses for Pennies.
to be sure you understand these changes I will detail them in the pages that
follow. Keep in mind that many of these changes were designed eliminate any
confusion, injustice or inefficiency in the process of administering the sale
of tax foreclosed lands in Texas. In each scenario, I will duplicate the
exact text of the House Bill and then explain its significance. The changes
are discussed below:
Changes to Bidding Rules:
House Bill 335 was passed by Texas voters and became effective on September
1st 2003. The primary reason this amendment was to make ensure
that bidders at tax foreclosure sale were not delinquent taxpayers themselves
in the county where the sale is being held. This makes a great deal of sense
when viewed from the vantage point of the county. Obviously, the county has
a vested interest in placing the tax foreclosed parcel back on the active
tax role. If the purchaser at tax sale also presents a risk of non-payment
then the cycle of delinquency will repeat itself. You should comply with
the amendment and obtain a certificate from the tax assessor located in the
county where the sale will occur. This certificate will indicate that you
are not currently delinquent on your property taxes. It is not a complex
procedure but it nevertheless must be completed before the auction.
be wondering exactly how much time must allow for the completion of this form.
I can tell you from experience that it is really no big deal and should be
completed at least 5 days before the auction date (if you are buying
at a regular sale) or your anticipated date of purchase (if you are buying
tax deeds held by the county). The form will require you to list all properties
that you own which lie in that county. A clerk at the tax office will verify
that you do not owe delinquent property taxes, school taxes or city taxes
on property you own in the county where the sale shall occur. The fee is
$10, and the qualified bidder shall receive three copies of the statement.
This statement is good for 90 days from the date of issuance and must be presented
at the tax sale auction. If you have any questions about obtaining the certificate
please call me personally at: 713-961-1134.
provision of this House Bill is also relevant to the investor. The new rule
states that one cannot bid via proxy (i.e., on behalf of another). The practical
significance of this amendment is that the sheriff can only make the deed
out to the party who is bidding at the sale. Therefore if .John Smith. is
the bidder then the sheriff.s deed must be made out to the order of .John
Smith.. It is likely that this was done to reduce the risk of a delinquent
taxpayer purchasing tax defaulted property since the presence of .proxy. bidders
(those bidding on behalf on another) can create some confusion and difficulty
when trying to verify who the final owner of the parcel will be.
question that I am repeatedly presented with is the effect of this amendment
on those who are bidding on behalf of their own company. For example:
Yes, Albert can bid on behalf of his company since he is an agent of his
company in his role as President. In addition, his company, ABC Corp. is
also not .another person. according the language of the Bill. In
summary remember that the law does not apply to corporations, partnerships,
limited liability companies, charities, or agencies. These entities can have
another bid on their behalf. If you have followed my suggestions then you
should already have a business entity which is used to purchase your tax deeds.
As a result the net effect of this rule is zero. What if you don.t have a
company formed yet? In that case you can still bid and buy tax deeds but
you must be present at the auction and you must do the bidding yourself.
An Additional Suggestion
area to consider is whether or not Albert should obtain two certificates of
non-delinquency from the county: one for himself and once for his company,
ABC Corp. Although this appears to take the scope of the Bill a bit far I
recommend that you perform this step. Since this is a new law one cannot
be sure how it will be interpreted by those who administer the process (i.e.,
the sheriff, the constable, the recorder.s office, etc.). I think you should
obtain a certificate which indicates that you and your business entity are
not delinquent regarding any property taxes in the county where the auction
is held. Regardless of whether or not your entity owns any property in that
county you should take this additional step.
Redemption Period for Mineral Interests
|House Bill 1125
Effective September 1st 2003
The tax foreclosure redemption period on mineral interests is extended from six months to
Bill 1125 was passed by Texas voters and became effective on September 1st
2003. This amendment seems like it would be quite significant for tax sale
investors since it effectively creates another redemption time period for
properties with a .severed. mineral interest (don.t worry I will explain
what I mean by .severed.). In reality it does not really have much impact
for most investors.
to understand this Amendment we must first acquire an accurate picture of
the .dual estates. system which is effect in Texas. In Texas, each parcel
of property located in the state is really made up of two estates which can
each be owned by separate individuals or entities. More specifically there
is a .surface estate. and a .mineral estate.. The surface estate is the land
that you see when you examine a property and it generally begins at the surface
and proceeds upward to the sky. On the other hand the mineral estate begins
below the surface and extends (at least in theory) to the core of the earth.
These two estates, the surface estate and the mineral estate, are considered
one unless they have been separated or severed by a conveyance or grant to
another party. That is to say that unless these estates have been split,
the general rule is that if you purchase the surface you also obtain all rights
to minerals lying under the surface as well.
if the mineral interest has been granted or conveyed to another through a
mineral deed, for example, then the estates are considered severed. If the
estates are severed and the surface estate is sold at a tax sale then the
mineral interest owner will have 2 years to redeem their interest regardless
of what the redemption time period is for the surface estate. Let.s look
at an example:
As you can see this amendment has created an extended period for the owner
of the mineral interest to redeem the parcel. Confused? Well don.t worry
this really will not impact most of you who follow my recommendations. In
my course, Texas Houses for Pennies, I make sure that you eliminate risk from
the equation. I have always advocated focusing on residential properties
located in subdivisions. Unless you are focusing on ranch land or large undeveloped
parcels of land it is doubtful that this will affect your strategy at all
since city restrictions prevent exploitation and use of subsurface minerals.
If you are in a predominantly rural area and the parcel has a structure that
is located at the far end of town and it appears questionable, then you may
wish to perform a quick search of the title index. You should simply access
the grantor/grantee index (as discussed in Lien Research Guide found in Texas
Houses for Pennies.). While you are looking at the records check for any
sales of the mineral estate. The conveyance will be fairly easy to find
if it exists and will show up on the records index as a regular deed, however
the deed instrument itself will say that it is .a conveyance of the mineral
estate. or that it is a .Mineral Deed..
these changes really have little effect on tax sale opportunities in Texas.
The opportunities are still very plentiful, especially in smaller to mid-size
counties. In fact, just before I started writing this article I received
a call from a student in Arizona who traveled to a tax sale in Travis County,
Texas. The gentleman purchased a single family home near a lake resort area
for $23,000. The property was recently appraised in 2002 for $235,000. While
the property needed some minor work, the investor stood to make a substantial
profit on the deal. I was also contacted by another investor from San Antonio
who informed me that he was making a good deal of money purchasing subdivision
lots in rapidly growing subdivisions. He explained to me that he purchased
5 lots at a Texas .resale. auction for under $400. These same lots were then
sold to another investor for $1,600 each! This illustrates that there are
still some good deals in larger counties, but imagine the opportunities in
many of the smaller counties where month after month properties fail to sell
for lack of bidders. Use common sense, learn how to research records and
contact me with your questions! If you need help researching properties
you can visit my website to access my free Texas research center.
Information contained within this article was not intended to be, nor should it be taken by the
reader as legal, financial or tax advice. The above article was written for educational purposes
only. If the services of a Texas attorney, or real estate mentor or coach are desired please
contact Mr. Barazandeh or seek the services of another professional.
The author, Darius M. Barazandeh, Esq. is a licensed attorney in the state of Texas. In addition
to his legal knowledge he has a Masters Degree (M.B.A.) in Business Finance and brings experience
from numerous fields including tax sale investing, real estate construction, corporate finance,
and business consulting. Frustrated by the lack of realistic information regarding tax foreclosure
sales and other investments, he is "unlocking the secrets" to many of these creative
investment methods with his unique 'clear cut' writing style, attention to detail, and legal
knowledge. His product Texas Houses
for Pennies is the highest rated tax foreclosure guide in
the United States! 
Current Membership Includes:
- Real Estate, Probate, and Trust Law Division of the Texas Bar Association
- Business Law Division of the Texas Bar Association
- Taxation Division of the Texas Bar Association
- Environmental and Natural Resources Division of the Texas Bar Association
- Alternative Dispute Resolution Division of the Texas Bar Association
- Consumer Law Division of the Texas Bar Association
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