SELLER FINANCING PROPERTIES
Seller financing properties that you purchased at a tax sale can earn you quick profits and generate steady income streams. Lee, a successful Ted Thomas student, shares in detail how this process works from start to finish in Georgia.
In the state of Georgia, the cities and the counties assess property taxes on real estate. That’s the way that the state and the counties raise revenue to operate the governments.
The tax assessor goes out and evaluates your property and puts a value on it. Then the local county officials, the city officials attach a millage rate to that, and they calculate that rate.
It comes up with a tax bill based on the value of your property. Ad valorem, “of value,” that’s how they come up with what you owe per year in property taxes.
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SELLER FINANCING PROPERTIES – PROPERTY TAX
They normally send you a bill around the middle or the latter part of the year, and you have two or three months to pay it. If you don’t pay it after that time, they start assessing penalties and interest.
It goes through a process. One, they add a penalty to it if you pay late, and then they start charging you 1% a month interest until it’s paid.
They allow that to go on for a certain period of time. They send you notices, several notices, and the warnings get a little bit stronger and stronger as time goes on.
Then they send you a notice that they’re going to file a FiFA (Fieri Facias).
SELLER FINANCING PROPERTIES – FIFA
A FiFA is a legal claim to the property, similar to a mortgage. It’s filed on record in the courthouse and put on record with the credit bureaus, and anybody else can go in and take a look at that.
When a lawyer checks a title to a piece of property, that’s one of the things he looks for and to see if there are any legal claims to the property.
He would find the FiFA listed and would ensure that the FiFA got paid before giving you a clear title to the property.
SELLER FINANCING PROPERTIES – FORECLOSURE
The next thing that happens after they file this FiFA is they can go in and foreclose on the property and sell it. In order to do that, they have to levy on your property.
Levy is a legal term that they have to send you a notice by certified mail, return receipt requested, saying that you have a certain period of time in which you can pay the property taxes, the penalties and interest.
SELLER FINANCING PROPERTIES – SHERIFF’S SALE
If you don’t pay, your property is subject to sale by the governmental authority on the courthouse steps.
It’s called a sheriff’s sale. Either the local county sheriff can handle that sale, or he can designate an ex-officio sheriff, which is normally the tax commissioner, and then the tax commissioner would handle the sale.
That’s what’s normally happens. The tax commissioner handles the sales.
SELLER FINANCING PROPERTIES – PAYMENT PLAN
If you, the property owner, go in and work out a plan, they let you pay out over time. They’re very flexible in working out a payment plan with you, but you do have to go in and make some effort.
They will bend over backwards to try to help you pay your property taxes. They’re more than reasonable, and some counties let it go on for years; some even let it go on indefinitely.
SELLER FINANCING PROPERTIES – THE COUNTY
Every county tax official sets up his own criteria as to when and how he wants to collect the taxes. The state law governs what has to happen legally, but the timeframe is pretty much up to the local official.
How they want to do it and what time frame, how long they want to give you before they start taking action and before they file a FiFA, before they file a levy, before they go to foreclosure, all those things.
It’s pretty much up to their discretion, timeframe wise. The local official can take care of local people then, if he wants. They work out any kind of a plan that you want to.
SELLER FINANCING PROPERTIES – ESCROW
Most of the time, if you have a mortgage on the property, you will have what they call escrow accounts. You pay 1/12 of your property taxes and 1/12 of your insurance, along with the monthly payment of principal and interest.
Then once a year, the escrow company or mortgage company comes in and pays your property taxes for you. It’s like a savings account to pay these bills.
SELLER FINANCING PROPERTIES – PRIORITY OF A TAX LIEN
Most people with mortgages don’t have to worry about coming up with money to pay the property taxes. The mortgage company is going to ensure that they get paid, because a tax lien is a priority lien.
The tax lien comes in front of a mortgage. So if it gets foreclosed out, the mortgage company gets foreclosed out. They lose their rights in the property.
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SELLER FINANCING PROPERTIES – SELLER FINANCING EXAMPLE
Ted Thomas: Let me take a look at that. This says you paid $266 and 95 cents. Is that right?
Lee: That’s correct.
Ted Thomas: That’s what you paid on it? What was it?
Lee: Well, this was a 0.85 tract, about a little over three quarters of an acre.
Ted Thomas: This is kind of like a map of all the different properties?
Lee: This is a subdivision map.
Ted Thomas: Which one did they get?
Lee: This is the one up in the corner.
Ted Thomas: And you only paid $266 for that!
Lee: It’s got a paved road, all the utilities, a lake access line. That is not a waterfront, but it owns an undivided interest in a waterfront lot on a 15,000 acre lake.
Ted Thomas: Now this isn’t an old swamp now. It’s really a lake.
Lee: This is one of the best lakes in the state of Georgia, a great bass fishing lake. They had the Bass Masters tournament here this year.
SELLER FINANCING PROPERTIES – A $266 LOT SOLD FOR $4,900
Ted Thomas: What did you sell it for?
Lee: I sold it to them, financing it for nothing down, for $4,900, which is about the marketplace value and what the tax assessor says the property is worth for tax purposes.
Ted Thomas: What is this document?
Lee: Well, this is where I sold it to this couple for $4,900. $75 a month for 20 years.
Ted Thomas: Wait a minute. In three months time, you get all your money back?
Lee: Yes. I do it on a pretty regular basis.
SELLER FINANCING PROPERTIES – EXAMPLE 2
Ted Thomas: Have you got another one you can show me?
Lee: Yes, here’s another one.
Ted Thomas: You got a whole file of these here! You’ve got a lot of them.
Lee: This is an acre lot. I sold it to an older couple, and they’re planning on building a retirement home on it. I bought it at the tax sale for $264.62.
Ted Thomas: This is a Sheriff’s deed again, it says here. This is what you bought at the tax sale, an acre lot, $264.62, and this is signed by– What are these seal numbers up here? Oh, it says the deputy clerk, so this is the official document?
Lee: It’s recorded in the courthouse.
SELLER FINANCING PROPERTIES – A $264 LOT SOLD FOR $4,900
Ted Thomas: Now what did you sell that one for?
Lee: For $4,900, same price. I found that’s a good round number that people can live with.
Ted Thomas: So people pay about $5,000 for a nice lot like this?
Lee: In this area, yes.
SELLER FINANCING PROPERTIES – CONTRACT FOR DEED
Ted Thomas: Did they give you cash for that?
Lee: No. They give me a contract for deed.
Ted Thomas: Now, what does that mean?
Lee: It means that I’m financing the property for them. I maintain the title in my name, and I agree that if they pay me out as per the contract agreement, that I will give them a deed to the property.
Basically it says that if they pay me on time for 24 months, then at the end of 24 months, I’ll give them a warranty deed, and they’ll give me back a security deed and they will now be vested in fee simple title to the property.
Ted Thomas: Lee, how do the people know that you’ve got a $5,000 dollar lot for sale?
Lee: I run small classified ads in the newspaper.
SELLER FINANCING PROPERTIES – WHAT IF THEY DON’T PAY?
Ted Thomas: So those are your little ads in the circle there? Oh, zero down! So they don’t have to put any money down. You’re seller financing properties. Well, aren’t you kind of afraid they won’t pay?
Lee: Well, the land stands; the value stands for itself.
Ted Thomas: What does that mean? The value stands for itself?
Lee: Well, the land is still there.
Ted Thomas: So if they don’t pay, you take it back?
Lee: The land was here when we got here, and it will be here when we’re gone. It’s always going to be there. If they can’t pay for it, then somebody else will.
SELLER FINANCING PROPERTIES – EXAMPLE 3
Lee: I bought one and it had a single-wide manufactured home on it.
Ted Thomas: I see you got 4.5 acres, and how much you have to pay for that?
Lee: I paid $331.74.
Ted Thomas: Oh, now this is unbelievable! Let me have a look at that. I mean, $300 for 4.5 acres? $331.74. Oh boy. So did you ever sell it, or do you still own it?
Lee: I sold that one.
SELLER FINANCING PROPERTIES – A $332 LOT SOLD FOR $15,000
Ted Thomas: What do you sell something like that for?
Lee: I sold that one for $15,000.
Ted Thomas: $15,000?! Did you finance it?
Lee: Yes.
SELLER FINANCING PROPERTIES – DEED TO SECURE A DEBT
Ted Thomas: Do you have the paper with you? I’d love to see it. So this is a deed to secure a debt, and on the deed to secure a debt, it says right here that– you just did this one recently– it says $15,000.
So you’re telling me someone could do this, buy a five acre lot that even has some improved property on it, a manufactured home?
Lee: Right.
Ted Thomas: You bought it for around $300, and you sold it for $15,000!
CONCLUSION
We hope you enjoyed today’s example of how lucrative it can be seller financing properties that were purchased at a sheriff’s sale, also called a tax sale.
In this interview, Lee, a successful Ted Thomas student, tells us how things work in his neck of the woods, Georgia. He explains the process there from start to finish and then details 3 incredibly profitable real estate deals that he made.
Lee purchased 3 properties, each for a few hundred dollars, and sold 2 of them for $4,900, and the 3rd one for $15,000!
He used seller financing to do it, made his money back in just a few months, then could look forward to receiving a regular stream of income for the next 20 years.
Seller financing properties can make you a bundle of cash, especially if you purchase tax delinquent properties at a deep discount, which leaves you with a large profit margin.
You make your money when you buy, and Ted can show you where and how to buy, then sell, bargain real estate just like he showed Lee.
For the past 25 years, Ted Thomas has been guiding, teaching, and coaching newcomers as well as experienced investors, and he can give you an insider’s perspective and all the foundational material on investing in tax liens and tax deeds.
Ted Thomas is the only one who offers full support and a complete training program with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching.
If you’d like to learn how to create massive cash flow from deep discount real estate, you can get started today at no cost by taking advantage of Ted’s FREE Master Class on America’s best kept secret, tax lien and tax deed investing.
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