Separating Land from Houses on Your Delinquent Tax List (It’s Easier Than You Think!)

separating land from houses

When it comes to the land investing strategy, there are a couple of “list-sorting” questions I've heard again and again from the readers of this blog, so I'm going to answer them once and for all in this article.

These questions typically come from investors who are trying to get a delinquent tax list from the county, and they usually go something like this…

Question 1:
How can I get a list that ONLY includes vacant land (without any houses, apartments, commercial buildings or other properties I have no intention of buying)?

Question 2:
When I get my list, how can I know ahead of time which properties have any liens or mortgages on them (and how can I eliminate these recipients before I send out my mail)?

Luckily, the answers to these questions go hand-in-hand with each other – and its good news on both accounts.

photo-1446034295857-c39f8844fad4When you get your hands on your county's delinquent tax list, you'll find that by default, MANY of the properties on this list will automatically be land (not houses, not multi-family apartments, not office buildings) and it's not a coincidence. In some ways, it's almost like the delinquent tax list was designed specifically for the purpose of land investing. Here's why…

In the United States, the vast majority of houses (and other properties with on-site “improvements”) have mortgages on them. This doesn't come as a surprise to most of us, because most folks don't have enough cash on hand to buy a house without a mortgage.

Something most mortgage lenders have in common is – they require their borrowers to maintain a property tax escrow account as a way to ensure their property taxes and hazard insurance are paid current.

A property tax escrow account is generally a good thing for both the lender and the borrower. It ensures that these necessary costs don't fall behind and the property (i.e. – the borrower's asset and the lender's collateral) isn't at risk of being seized by the county in tax foreclosure.

Keeping these property taxes paid current is of great importance to both the lender and the borrower because if these properties ever become so far delinquent that the property is seized by the county, both parties are in big trouble. The lender will completely lose access to their collateral, and the borrower will completely lose their asset (and all the principal payments they've made to date). In short, it would be a pretty big disaster for everybody.

Even in the rare cases where a property tax escrow account isn't required, the lender is STILL going to closely monitor the status of these property taxes to make sure they don't go delinquent. Given what's at stake with their collateral, it's only prudent for them to mitigate this risk.

Land is Different

photo-1442606440995-d0be22c5f90fVacant land is a different animal. As a matter of policy, most mortgage lenders won't lend money on land UNLESS the borrower has a specific plan to develop the property immediately (in which case, the property wouldn't be classified as “vacant land” anymore).

As a result, the vast majority of vacant land in the U.S. is owned free-and-clear with no mortgage lender involved. Since most of these undeveloped lots are owned free-and-clear, these property taxes aren't being maintained through an escrow account, and the tax situation isn't being monitored by a lender.

The net result is that these owners are at a MUCH higher risk of falling behind on their property taxes and it's not because the taxes are too expensive. Most of the time, it's because these owners simply forget about their taxes (it literally falls off their radar) or because they're tired of paying taxes for a property they never see and never use.

When this happens (and it happens a lot), these properties get added to the county's delinquent tax list.

Most people think differently about houses – usually because they're forced to (because of an escrow account). The net result is that most houses will never end up on a delinquent tax list, but MANY vacant land properties will.

Automatic Separation

The good news is – if you're concerned about getting a delinquent tax list that is chocked full of houses and other property types you don't want – you can be reasonably confident about a couple of things:

  1. MANY delinquent tax lists will automatically have a very high concentration of vacant land.
  2. Almost all (i.e. – well over 95%) of the properties on these lists, regardless of the property type, will be owned free and clear by their respective owners.

Since both of these factors are at work in the delinquent tax lists I get from the county, I rarely go through the motions of separating the vacant land from the houses. Instead, my primary concern is simply that I'm working with the delinquent tax list, to begin with – because this largely takes care of both issues by default.

About the author

Seth Williams is a land investor and residential income property owner, with hundreds of closed transactions and nearly a decade of experience in the commercial real estate banking industry. He is also the Founder of REtipster.com - a real estate investing blog that offers real world guidance for part-time real estate investors.

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  1. Ariel Muller says:

    Hey Seth, I’ve been having trouble getting a list of delinquent properties from the county, I was told by the assessors office the don’t have that information.
    whats the trick?

    1. Seth Williams says:

      Hi Ariel, in most cases, the trick is to keep trying other counties until you find one that will work with you.

      The truth is – every county has this list (whether the person you’re talking to is aware of it, now that’s another story). It’s usually worth push a little bit to get it (ask to talk to someone else, or see if they have an IT department that can help you) – but it’s not worth killing yourself to get. When you get a county that just won’t make it easy – just hang up the phone can call the next county. If you try enough counties, you’ll eventually find plenty that will work with you.

  2. gamuda says:

    always appreciate the info. thank for share

    1. Seth Williams says:

      You bet Gamuda!

  3. mike says:

    If i find a motivated seller who is behind on his property taxes and he agrees to sell his property to me. Who pays the taxes that have gone unpaid for months/years? As the buyer, am I liable?

    Great Blog btw, hear you on investfourmore and you were great!!

    1. Seth Williams says:

      Hi Mike, the word “liable” may be a little strong – but essentially, if there are delinquent taxes on any property, it’s the current owner’s problem to get them paid off. In other words, before the property is sold, it’s the seller’s problem – but if you take the deed and the taxes haven’t been paid off as part of the transaction, now it’s your problem. Either way, there should be a plan for someone to pay them off when the property changes hands (and with most of the deals I do, I’m the one who ends up footing the bill).

      1. Michele says:

        Hi Seth,

        I am also a bit skeptical about this part. If your major pool of properties are coming from the deductible tax list, you can expect that the property you intend to buy will have delinquent taxes. So I am not sure why you would say “if there are delinquent taxes on a property…” if this is exactly what we are targeting.

        I am interested specifically in land flipping, so let’s take a look at that scenario. I have a motivated seller who has a property who’s market value is worth 30,000 dollars. I make them an offer of 5,000 dollars, but there are 10,000 dollars worth of taxes owed. How is this still a good deal? Can you request forgiveness for the debt from the county as the new buyer? I know you can reduce tax liens on residential properties with homes..I’ve been able to reduce 100,000 dollars worth of liens before.

        So I am just wondering what this process looks like for vacant land. And, how do you make the deal worth it? Or are delinquent taxes on properties usually miniscule in comparison to what I should offer the motivated seller?

        Thanks a lot in advance!

        1. Seth Williams says:

          Hi Michele, thanks for sharing your thoughts. Sorry for any confusion on this – but yes, if you’re marketing to the delinquent tax list, you can obviously expect there to be delinquent taxes on the property you intend to purchase (and you’ll likely have to pay these off as part of your closing process).

          As for the scenario you mentioned above – if the tax balance and the payment to the owner is equal to 50% of the property’s market value, I wouldn’t do this deal. It just doesn’t allow a big enough profit margin for me to feel comfortable with.

          More often than not, I think you’ll find that the property tax bill is usually FAR less in relation to the property’s fair market value. What you’re looking at in this case can certainly happen (and when it does, I usually walk away from the deal), but in most cases, the tax balance AND the payment to the owner should be more in the range of 10% – 30% of the property’s fair market value,

          Does that make sense?

          1. Borkus says:

            in michelle’s scenario, she would be doubling her money — is that really not a good deal?

          2. Seth Williams says:

            Hi Borkus – your question is definitely valid… in my experience, I’ve found that when a vacant lot actually sells, the sale price ends up being quite a bit less than the “full market value” that most people would assign to it. Part of the reason why people buy from me is because I’m offering a significant discount, so the actual gross income is rarely as high as the market value would be. This is why I try to get the biggest profit margin I can, because in many cases, I’ll need that wiggle room in order to sell it and still make a good profit on the deal.

            Of course, you could hold out for the full market value price (and in that case, you’re right – it wouldn’t be a bad deal if you can really double your money), but holding out for full market value will take a lot longer to sell most vacant lots. If you’re not offer a real incentive (like a discount, or seller financing), many people just won’t be interested enough to buy from you.

  4. John anderson says:

    Hi Seth, great info as usual. I don’t understand about the deliquent tax list. At another great info site of yours it was about getting the list and your postcards it was about the houses I thought. So when I pick up my first list on Friday is it mostly land as you are saying or does not have houses to purchase and start my rental property portfolio?

    1. Seth Williams says:

      Hi John, if you’re getting a delinquent tax list, you’ll find both types of properties in there. My point with this blog post is simply that by nature of the fact that you’re getting ONLY the properties that have delinquent taxes, many of them will (be default) be vacant land properties. There will certainly be houses mixed in there as well, but if you eliminate all of the owner occupied properties, you’ll find that many of these properties are nothing other than land.

  5. Brandon says:

    So far, a lot of the lists I have looked through you are absolutely right, they are mostly vacant land. A lot of that land isn’t just residential vacant land, there is a lot of agricultural. I know every county is different but in the model of land flipping isn’t agricultural or grazing land pretty hard to flip since it’s limited use?

    1. Seth Williams says:

      It could be, but it’s not necessarily to be assumed. If anything, I’d say this kind of land is harder to get for pennies on the dollar, because if it’s usable – it’s being leased and generating income (and most people are less apathetic about dumping this kind of property for nothing).

      Of course, you can never say “never” or “always” – but it’s what I’ve found to be the case most often.

  6. Jason Abild says:

    I have my first Delinquent Tax list and here are the property types on that list I received back using “vacant land” as a filter criteria. Which of these are we filtering out when scrubbing the list?

    PROPERTY TYPE:
    Agricultural Land
    Commercial Acreage
    Commercial Lot
    Industrial Acreage
    Industrial Lot
    Residential Acreage
    Residential Lot
    Vacant Land (Nec)
    Vacant Mobile Home

    1. Seth Williams says:

      Hi Jason – just speaking for myself, I would probably get rid of the Commercial and Industrial stuff (these types of properties can require some attention to environmental issues, which can be a headache… they also tend to have a smaller pool of buyers, but they can also make a lot more money in some cases). Otherwise, those other selections would look good to me.

      Again, not saying YOU need to follow in my footsteps, that’s just how I would approach it.

      Good luck!

  7. JC Spell says:

    Seth,

    Fantastic write ups on your blog, and I agree about the lists being largely land from my limited experience thus far. I’ve been able to obtain the delinquent tax lists from two counties in my first foray into land investing, but the responses I’ve gotten from some counties have been interesting. One rural county tax commissioner told me in her sweetest voice that “we just hate to have our property owners lose their land so we work with them”. Two other counties near metropolitan areas asked me to submit Freedom of Information Act letters requesting the tax delinquency lists!

    1. Seth Williams says:

      Thanks for sharing your experience JC! I know what you mean – some counties are a TOTAL pain to work with (but if you can bear to deal with it, the results almost always prove to be worth the trouble). Hang in there!

  8. Doug says:

    Seth;

    Great info on your website, videos, and guides. Looking forward to getting started.

    One question-
    Do any of the counties offer the delinquent list or tax lien lists on their websites?
    Or do you have to call each one of them?
    Also, when would you hire someone to handle a closing? And do the title work?
    I was thinking it would make sense for a property over $3K?
    How do you think about this?
    Thx again!

    1. Seth Williams says:

      Hi Doug, I think many counties probably offer the list of properties that are heading to tax sale (i.e. – properties that have already been foreclosed by the county and are no longer available to purchase directly from the owners) – this is often confused with the “delinquent tax list” as I explain it.

      There may be some counties that make the correct list available online, but I haven’t encountered many in my time (that’s not to say you couldn’t get lucky and find a few out there).

      I usually buy title insurance for properties worth more than $5K, and I usually hire out the entire closing process for properties worth more than $10K (but if $3K is your number, I think that could certainly work too).

      Great questions – thanks for asking Doug!

  9. Nick says:

    A HUGE thanks to Seth!!! Cheers!!!

    1. Seth Williams says:

      You’re welcome Nick!

  10. Jordan Sims says:

    Hi Seth!
    I’ve obtained a tax delinquent list from a county in my area and have started browsing through it. I’m running into a lot of mineral property types that don’t have any addresses attached to them. In your opinion, are these property types that you would filter out?

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