We all have crazy things that have happened to us that seem too out of the ordinary to be true.
This happens in all walks of life, but I have found that there is a special kind of crazy for the stories that have come from real estate investors. I have been in the business for a while and had lots of unbelievable stories. The one I will tell you here is one of my first fix and flip.
I’ve outlined the mistakes so you can learn something from them, as I did!
The Haunted House Tour
It all started in the town I live in — Bordentown, NJ.
My wife and I were newly married, and I had just quit my job as a sales rep to invest in real estate full time. We had some rentals, but back in 2007 the fix and resell market was getting so hot that I started looking for a fix and flip project.
The town we live in is a pleasant town with mostly nice houses. There was this one house that was by far the “ugly duckling” in the area. It was missing a few windows and had clearly been vacant for some time. Our town does a “haunted house tour” where they walk you past all the houses that have stories of being haunted — you know what I’m talking about, right?
Well, this house was on the tour.
I would drive past the house on my way around town, and I would always think that it was a shame to let a house get to that condition. I thought that someone should do something about that house. I would think this every time I drove past it, and then I would forget about it for a while. I got tired of thinking and not doing, so I decided to look into it further. I did a public record search online and found the name of the owner of record. I then searched for him online, but wasn’t able to get anywhere.
Related: How to Analyze a Fix and Flip: A Step by Step Case Study
At least I tried, right?
A Few Months Later
Fast forward the story to a few months later when I was being courted by a title company for my business. They asked me if there was any property they could look into for me at no charge to prove themselves. I thought what the heck and I gave them the address of the house.
They sent me the report and to my surprise, the name of the owner of record was spelled differently on the deed versus the way it was spelled on all the other public record documents. “Huh,” I said. I searched for the name with the new spelling, and only person with that name came up in the tri-state area (it was a very unique name).
I picked up the phone and called the contact.
The man on the other end knew the house I was calling about and said it was his grandfather’s house. The man I was talking to seemed to be in his mid 70’s, so it didn’t seem to add up. I did a bunch of digging with him on the phone — and got the full story.
An Old Home’s Story
Isaac (the grandfather) died in 1964. His son Charles inherited the house, but did not want to live there. He decided to allow his cousin James to live in the house with his family, as long as he would pay the real estate tax bill.
In 1984 Charles dies and doesn’t tell his son Charles Jr. about the arrangement. Charles Jr. is who I am now speaking to on the phone and lives in upstate New York.
In 1992 the cousin James dies. His family and their descendants continue to live in the house, still paying the tax bills addressed to Isaac, who died in 1964. At some time in early 2002, the remnants of James’ family moved out also.
When they moved, they of course stopped paying the tax bills made out to their distant relative who died 40 years ago, so the property went into arrears on taxes. By the time I contacted Charles Jr., he had been contacted by the tax lien holder and was considering his options.
Charles Jr. and I were able to strike a deal for me to purchase the house at a price that would pay off all the back taxes and put a few thousand dollars in his pocket. He was able take ownership of the property through the surrogate courts fairly easily, as he was the sole surviving heir to the estate of his father Charles Sr.
It ended up being a nice windfall for Charles Jr., as a few months ago he didn’t even know he owned the house!
It would be great if the story ended there, right? Not so much.
Once we closed, the tax lien holder promptly sued me for something called “Title Raiding.”
In essence that means that you swoop in and purchase a property right before it goes to the courthouse steps on a foreclosure. Most of the time, banks are happy when you do this because it’s off their plate. Not the same for tax lien holders, as they actually WANT the property.
I was not sure what to do and hired the first attorney I could find who was able to come to court, not necessarily one who knew anything about real estate. We ended up having to defend ourselves in court and also pay settlement to the tax lien holder, which combined set us back $15,000 right after we purchased the house.
In hindsight I should not have let the tax lien holder push me around and paint me as a big developer who was trying to …read more