In what amounts to a different chapter in the same book of predatory foreclosure practices, thousands of homes in the District of Columbia – and potentially elsewhere across the nation – are going into foreclosure due to tax liens that amount to only a few hundred dollars in many cases.
According to reports, nearly 200 homes have been repossessed due to tax liens by tax lien investors – many of whom come from outside of the District – since 2005, and investors plan to seize over 1,000 additional homes.
In many cases, according to one Washington Post report, the tax lien on each home was worth less than $500.
Perhaps the most high-profile case involves a 76-year-old Vietnam veteran who had his home repossessed by a company in Maryland who purchased a tax lien placed on the house for $134 in 2006. The city added $183 in penalties and the initial bill of $317 was paid, but the company responsible had already filed in court and demanded $4,999 to remove the lien.
He couldn’t pay, so he was evicted in 2011.
Tax lien investing has been around forever, but it appears there might be laws and procedures in D.C. and other areas that need to be changed in order to protect homeowners. The city is justified in levying tax liens against homeowners who are severely delinquent on property taxes, but the process has to be fair and just for everyone involved.
The Importance of Research Before Buying a Home
This story highlights the importance of doing your due diligence and researching a property thoroughly before purchasing a home for any reason.
Homes like the ones highlighted in the investigation could have a myriad of liens on them, and if you purchase a home without checking to make sure your property is in the clear, it could result in seizure or heavy legal fees at the least.
If you conduct a title check, also make sure you purchase title insurance to protect yourself against anything that might not show up in the initial search. Doing so gives you the same benefit of car insurance – financial protection in case something goes wrong.
And for those who engage in tax lien foreclosure investing, check the local jurisdiction’s laws and regulations prior to beginning. It is likely they could very well change as a result of this and other investigations into the industry.