Each year on the fourth Monday in August, a world of opportunity opens up for real estate investors in Missouri. It’s tax sale time when properties that are in foreclosure due to tax delinquencies are auctioned off.
If considering entrance into the bidder’s circle, performing due diligence – on both the property desired and the buying process – is important. Turning the certificate of purchase into ownership of the property is a complicated process with many potential pitfalls. In many cases, one mistake can result in losing the property as well as any money already invested. Here are a few things a potential buyer should be aware of before bidding.
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Before the tax sale. Refer to the statute and the county’s tax sale website to determine what is needed to be eligible to bid, when payment will be due and what types of payments will be accepted.
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After the tax sale. A certificate of purchase will be granted in exchange for payment. This does not equate to immediate property ownership. Property ownership does not transfer until the statutory redemption period has passed and the strict requirements for issuance of a collector’s deed have been met.
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Redemption. Delinquent properties auctioned off for the first or second time are subject to a one-year statutory redemption period. For delinquent properties purchased at a third offering, the statutory redemption period is only 90 days. This means an auction purchaser of a property does not own said property until the property’s statutory redemption period has expired. If the property purchased is redeemed, the auction buyer is entitled to reimbursement of the purchase price with interest at 10 percent, as well as any subsequent taxes paid with interest at 8 percent.
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The collector’s deed. A collector’s deed must be obtained by the auction purchaser within two years from the date of the property’s sale – otherwise property interest is forfeited. Despite the expiration of the statutory redemption period, interested parties can redeem the property up until the day the deed is executed. In order to obtain the deed, several requirements must be met in order:
1. A licensed attorney or title company must be hired to perform a title search.
2. Notices must be sent to the interested parties of their right to redeem the property.
3. An affidavit must be presented to prove the first and second steps have been completed. Generally, the affidavit must include a copy of the title search and copies of the notice mailings.
4. All taxes due on the property must be paid so that taxes on the property are current; the original certificate of purchase must be surrendered; and recording fees and any other fee required by the county collector must be paid.
• Title insurance. Finally, note that property at a tax sale should not be purchased without understanding title insurance will not be available without a successful quiet title suit. The lawsuit will determine that no further challenges or claims of interest in the title can be brought against the purchaser/owner.
While several preventative measures should be taken, and several requirements must be met when purchasing a property out of foreclosure, preforming due diligence will reduce the risk involved, and acquiring a property at a competitive price can make the process worthwhile.
Lindsey Lund is a real estate attorney in the Springfield office of Husch Blackwell LLP. She can be reached at lindsey.lund@huschblackwell.com.
