Excess Is Excess

04 Sep Excess Is Excess

The advance technique on excess proceeds is a low effort technique, but certainly earns money. It simply requires you to buy a tax delinquent property before the auction sale and have the deed recorded on time. No more, no less.

By default, a tax delinquent property, say, worth $100,000 with $100,000 taxes will owe the owner 5,000 times more with penalties, interest and fees. This additional amount usually is estimated at $15,000 and is quickly accrued to the owner. The state gets this $15,000 and bidding usually starts at this. Some states start with no minimum bids like New York. Some start usually high in a highly competitive bidding. In metropolitan, bidding usually starts at $70,000. Thus, when the auctioned property is sold at $70,000 and the state only wants $15,000, there is excess proceeds, which is $55,000.

Who gets the excess proceeds?

By law in most counties, the owners can apply to get the excess proceeds at the time of auction sale. To obtain the $55,0000, the owner will have the deeds recorded at the time or before the auction sale. Otherwise, you lose the opportunity of getting the excess proceeds.

A classic experience that I have is when I bought 4 properties together in California before the tax sale on a Saturday. Each property had around $3,000-4,000 worth of back taxes attached to them. I signed a notarized deed on Thursday and have it recorded on Friday, but ownership transfer happens when the recorded deed is delivered to new owner. I let the auction passed and 1 of my 4 new properties was sold at $8,000. Considering the state only owed lesser at $3,000 plus, I supposedly was entitled to get an exceed proceed of $5,000 if the recorded deed was only delivered to me on Friday or Saturday.

By lesson, your deed must be recorded at the time of sale to obtain the excess proceeds and avoid from losing it. Buy the property before the auction. Do not redeem the property. Just let the property go for auction. Make sure your deed is recorded before or at the time of sale then apply for exceed proceeds and get it!