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Many investors are interested in purchasing real estate via city or county tax sales to take advantage of a below-market sales prices, which can be significant. However, because this process ultimately leads to taking possession of another’s home, governing bodies want to ensure that the process is done properly, which creates some hoops for buyers to jump through they might not be expecting.
To make this process even more confusing, local tax-sale investors must also understand that St. Louis City and St. Louis County (as well as other counties) follow very different processes. This blog post is going to focus on explaining how St. Louis County prepares for and conducts its tax sales and what steps investors need to take in order to ultimately get title the property.
St. Louis County (as well as many others in Missouri including St. Charles and Jefferson Counties) operates under the non-judicial formula prescribed by the Jones-Munger Act (RSMo. Chapter 140). Tax sales under the Jones-Munger Act occur on the fourth Monday of August each year and are held by the County Collector’s office. The Collector’s office will prepare a list of the properties with delinquent taxes to be sold at the auction, and this list will be published in a local newspaper for three consecutive weeks, starting about five weeks prior to the tax sale. The list can also be obtained at the Collector’s Office.
Properties being auctioned at tax sale can be auctioned up to three times (i.e., once per year for three years). If the property does not sell at the third auction, title to the property will revert to the County. Properties that have reverted to the County post-third tax sale are often referred to as “on the shelf” by investors. This is because once the property has reverted to the County, investors can purchase these properties from the County without having to bid at live active auction.
To recap, the steps of the process discussed so far looks like this:
Investors can purchase rights to the property at any auction or after Step 5 directly from the County. When a successful bidder pays for the property at any of the three auctions, the Collector will issue a Certificate of Purchase which will be recorded with the recorder of deeds. The Certificate of Purchase does not prove ownership or title to the property because the current owner has a right to redeem the property by paying the taxes owed plus expenses and interest.
In order to complete the process and receive a deed, the investor must provide Notice of the Right of Redemption by sending a certified letter to each party with an interest in the property. The letter must be sent no earlier than 90 days prior to the date the investor is eligible to receive a deed.
This begs the question, “What does it mean to redeem a property?” When an owner’s property is auctioned off for failure to pay property taxes, that owner is given a period of time to redeem or make good on the taxes owed. He or she can keep their home by paying the amount that was bid at auction plus the cost of allowed expenditures (e.g., the cost of a title report and certified mail) plus 10% Annual Interest on the delinquent taxes. This money goes to the successful bidder/investor so that the investor still receives a positive return on investment. Note, however, that investors can bid more than the actual amount of the taxes owed (e.g., because they really like the property and want to own it). Investors will not receive 10% on the surplus portion of this bid should the delinquent owner redeem. A visual of this calculation is provided here:
$ Amount Bid
+ $ Amount of Allowed Expenditures
+ $ 10% annual interest on Amount Bid or Taxes Owed (whichever is less)
= Investor’s Return on Investment
What if a delinquent owner does not redeem? If a property is not redeemed, the investor must apply for a Collector’s Deed by providing a copy of the title report, the Notice letters, and the certified mail receipts to the Collector’s office. Upon review and confirmation that the process was properly followed, the Collector will issue and record the Collector’s Deed.
Once you have a Collector’s deed to the property, you are considered the owner of that property, but that does NOT mean you have clear title to the property. In our experience, most reputable title companies will not provide title insurance at this point due to concerns that this process might not have been perfected. This is because Due Process – the constitutional right of the property owner (and others with an interest in the property) to receive notice of the sale and right of redemption may not have been sufficient. For example, the certified letter with the right of redemption may not have been delivered or may have been accepted by someone other than the property owner, or the property owner may be deceased. The tax-sale investor does not have to confirm that each party actually received the notice – only that the notices be sent. This creates a risk to title insurers as these parties could file a lawsuit to set aside the tax sale and collector’s deed claiming that due process was not followed. So how do investors get title insurance and ultimately the ability to own, rehab, and later sell the property? There are a few different paths to insurability:
If you are wanting to invest in tax sales or need to quiet title on a property, please reach out to us and take advantage of the flat fee pricing we can usually offer in this area. Contact us today by clicking here, or by calling us directly at 314.862.2237.
While many seniors choose to downsize after retirement, others are eager to find a way to sustain their families by making use of more land. Homesteading is a great way to save money, get involved in a useful, sustainable hobby, and spend more time with your loved ones, but it typically requires some space to spread out. If you’re interested in homesteading, think about the specific activities you’d like to pursue — such as farming, making textiles or decor to sell, or creating room for your family members to live or visit — to get an idea of the sort of property you’ll need to look for. Here are a few things that you should keep in mind when you’re ready to think about a post-retirement move. Be sure to discuss local subdivision, HOA, licensing or zoning restrictions with your attorney at Home Sweet Legal® or The Jacob Law Firm, LLC prior to proceeding.
Get pre-approved
Because homesteading usually requires a bigger property, most people go with a mortgage that will help make the purchase more affordable. There are several different kinds, however, so it’s essential to think about the best one for your specific needs. If you have good credit, a conventional loan might be the best option, but there are also VA loans and FHA loans, which are federally backed and are helpful for those who have lower credit scores. These typically require more money down — up to 10 percent of the total cost — so it’s best to explore all your options to get the best deal. Download a credit monitoring app that will help you stay on top of your score; some even have built-in score boosters that consolidate the bills and loans you’ve paid on time and factor them in. Start your application for a mortgage and get pre-approved so you’ll have peace of mind.
Plan for your family’s needs
When your funding is taken care of, think about what type of property you want. Homesteading requires some careful planning, so consider what your family’s needs are now and what they might be down the road. Farming and keeping animals will necessitate quite a bit of land, of course, but you might also want to build a guest house, detached garage, or workshop. Do some research on the types of permits you’ll need to build; these vary by state, and sometimes county by county and locality by locality, and may come with hefty fines if they aren’t obtained in a timely manner. Keep in mind that some states offer free land for homesteading, which is dependent upon a few factors and an application process.
Often, it takes a little imagination to picture what can be done with a house, so keep an open mind when looking at different properties. You may be able to turn an unused space — such as a sun porch or shed — into a functioning area.
Consider the possibilities
Homesteading comes with a lot to consider, including how you’ll utilize the space. Generally, the act of homesteading includes living off the land or making good use of the property for growing food, creating furniture, clothing, or other useful items, and/or making room for extended family to live or visit. However, you can turn homesteading into a business as well and make a successful living while working from the comfort of your own home. Just remember, as we mentioned above, local licensing or other restrictions on the property should be evaluated by your attorney prior to submitting a purchase contract. Woodworking, growing and making various foods and baked goods, and sewing clothing items are all great ways to get started. You might check out the local farmer’s market to see about getting a booth or consider setting up an e-commerce website. Just be sure you take the necessary steps to legitimize your business. For example, you’ll want your attorney at Home Sweet Legal® or The Jacob Law Firm, LLC to set up your Missouri or Illinois LLC or other business type to make sure it gets done right. Doing so has several benefits, including allowing you to set up a business bank account and helping you protect your personal assets from any business debts you incur.
Expanding your home after retirement is a great way to live independently and take care of your family while leaving a legacy. Think about how to make the most of your property and how to sustain your lifestyle by monetizing it where possible.
Guest Blogger: George Miller – George believes one of the keys to well-being is security. Whether you’re securing your home, preventing fraud, protecting your online presence, or securing your finances, it’s important to take practical but often-overlooked safety measures, which is why he created Securabilities. In his free time, you can probably catch George at an Atlanta Braves game with his family or tinkering with his latest home DIY project.
Photo via Pexels
If you are buying or selling a home, or if you have a Real Estate or Business Law matter and would like to discuss it in greater detail, we can be reached at 314.862.2237 or just fill out our contact form by clicking here.
I (Marc Jacob) just wanted to share some personal thoughts on this topic since I get called upon to speak about it or weigh in on it quite a bit. There is quite a bit of danger to a small business going into a new commercial lease. While that term sheet you approved may look relatively benign, the devil is really in the details, and in the case of commercial leasing, those details are likely to be 20-60 pages long!
To navigate that process, it’s important that you bring in legal counsel early on in the process. We’ve seen a number of clients give away things in the term sheet they did not have to, and once that term sheet is done, it is hard to get a landlord to open it back up for negotiation…whether it’s considered impolite or amateurish, or perhaps even dishonest no matter how innocently done, I am not sure, but does seem to be the customary way to deal with it in St. Louis.
So here are some basic considerations to consider, and to discuss with your attorney:
Anyhow, this is a short post, but it is just a topic that has been coming up and since it really is such a danger area for a small business and can cause so much stress, I wanted to share with you at lease some thoughts on how to find the right lawyer to help you. As a small business owner, your budget is already tight, so it’s better to know up front what this cost will be before getting in too deep. Also, your lawyer might know which landlords in town are more difficult or likely to be heavy handed and can guide you even before you get to the term sheet stage.
Happy Leasing!
A limited liability company (“LLC”) is an entity that allows the owner (also called a “member”) to maintain control over the entity and in many cases to still have the benefits of “limited liability.”
Limited liability means that the owner/member is not personally responsible for the business’s debts or obligations, except in certain circumstances.
In Missouri, LLCs do not require the formalities of a corporation, making it the simplest form of limited liability ownership.
The actual formation of a LLC in Missouri is relative simple. The Missouri Secretary of State allows for online formation.
The more difficult part, however, is operating the LLC properly and complying with state law. For this reason, we do not advise that people setup an LLC themselves or through a discount service.
An LLC owner should:
In a single-member LLC, Missouri law requires (RSMo. Sections 347.081.1 and 347.015(13)) a written operating agreement. It is not mandated for multi-member LLCs, but strongly advised. Perhaps one reason it is not mandated in multi-member situations is that the parties are more likely to put the agreement in writing for their own protection.
We have seen a number of situations where the lack of a written agreement has led to strife as well as lengthy and expensive litigation. We generally advice all of our clients to make sure they have a clear operating agreement in writing prior to commencing the operation of the business.
If you would like more information on starting your LLC, please contact us at 314.862.2237 or at mjacob@marcjacobesq.com
A Buyer should show their private home inspection report to their lawyer, so that the lawyer can properly write an inspection notice to protect the Buyer’s interest.
When buying a home, an important part of the due diligence process is getting a private home inspection. This inspection helps the Buyer better understand the current state of the house they wish to purchase.
A private home inspector walks through the home, does a visual inspection, takes pictures of things that appear dangerous, are deteriorating, or might not up to code. They also test the various systems in the home, such as electrical, gas, heating and cooling, and sometimes the kitchen appliances. An inspector can go up on the roof, look at the brickwork and determine what type of shingle, siding and tile has been used on the house.
Most contracts allow for an “Inspection Period,” during which Buyers can request repairs or otherwise object to the condition of the house. During this time, the Seller has an opportunity to fix the problems cited by the Buyer.
In many St. Louis home sales, the Buyer provides the Seller with an Inspection Notice during the Inspection Period. The Inspection Notice details what repairs or replacements Buyer wants made prior to closing.
It is very important for the Inspection Notice to be properly drafted and sufficiently detailed to avoid confusion between the Buyer and the Seller and to be enforceable in a court of law, if necessary. For these reasons, Buyers should consider showing their private inspection report to their attorney before finalizing the notice.
At the very least, Buyer will want to show their attorney the language Buyer or their agent wrote, in order to sharpen the language for Buyer’s benefit.
Your attorney will likely have dealt with many inspection situations in the past and is trained to write the notice in a manner that will make it most likely to be enforceable.
If you have questions about your private inspection report or would like to discuss your situation, please contact us at 314.862.2237 or at mjacob@marcjacobesq.com
There are many people and companies involved in a home purchase. Some of the familiar ones are the:
In addition, there are a number of parties that the home buyer may be less familiar with, such as:
Each of these plays a unique role in the home buying process and these lists are not meant to be exhaustive. We find that having trained experts involved in the process minimizes the inherent risks of purchasing real estate
To learn more about types of inspections available, please read this post.Or, To find out how to find a private home inspector, please see this previous post.
If you are in the home buying process, please contact us at 314-862-2237 or at mjacob@marcjacobesq.com
Federal law requires Sellers of older homes (those built before 1978) to disclose whether they have any information about the existence of lead-based paint. That is why Buyers are generally given a “Lead Based Paint Disclosure” from the Seller or the Seller’s agent.
To learn more about the dangers of lead-based paint, the Environmental Protection Agency has published a pamphlet available here:
Lead based paint can be harmful to young children, infants and fetuses. It can enter your body in multiple ways. Each family should therefore be aware of its danger and should take it seriously. Whether or not you decide to get your own lead-based inspector is up to you and may be very fact specific to your situation.
In our practice, we do not see many Buyers get lead-based inspections, even for homes built prior to 1978. This may be because they are unaware of the existence of lead-based paint, or because they plan to repaint the home. Whether or not repainting protects against lead-based paint should be investigated prior to making the decision on an inspection.
If you have questions about lead-based inspections, please contact us at 314.862.2237 or at mjacob@marcjacobesq.com
For Buyers who need financing to purchase a home, the home purchase contract may give them some time to get a “Loan Commitment” or “Loan Approval.” The Buyer must get either of these before the Loan Contingency Deadline.
In addition to these terms, there are other terms that often get thrown into the mix, and that are helpful to understand. There is some variation across lenders, and the definitions below may not fit all lenders.
Pre-qualification means that the lender evaluated the potential borrower’s financial picture based only on information the borrower provided, and indicated the mortgage amount for which the borrower could possibly qualify. The lender has not reviewed the potential borrower’s credit, or any other supporting documentation.
Pre-approval is a different term and is somewhat more involved. To get pre-approval, the lender verified the potential borrower’s financial background, checked their credit, and reviewed the mortgage application and other supporting documentation. If pre-approved, the lender can provide the potential interest rate that the borrower would qualify for and may also allow them to pre-lock a rate.
Although a borrower may get a “Pre-qualification” or a “Pre-approval,” it is the Loan Approval or Commitment that are really the important benchmarks when it comes to the loan contingency deadline.
A borrower will therefore want to discuss with their lender what is required to get documentation that assures that the lender will provide financing.
A lender may not want to discuss appraisals or final underwriting until it gets closer to closing. This can be an area of contention between the borrower and the lender. If the lender has not finished underwriting, but has issued the approval or commitment, the borrower may be on the hook to purchase the house even when the bank is not yet fully committed to funding.
For this reason, we suggest that borrowers discuss the issue with an attorney if their lender is not willing or able to give them a satisfactory commitment or approval.
If you have questions about obtain a loan commitment or approval, please contact us at mjacob@marcjacobesq.com or at 314.862.2237
Many home purchase contracts today will give the Buyer a certain amount of time to get a “Loan Commitment” or “Loan Approval,” if the Buyer seeks financing to purchase a home. The Buyer must get either the Loan Commitment or Approval by the Loan Contingency Deadline.
The terms “Loan Commitment” and “Loan Approval,” are often used to mean the same thing in some standard real estate contracts and even in a number of court cases. One could argue that a loan commitment is stronger than a loan approval, or vice versa, but we have not yet seen any clear distinction in Missouri.
Although the lender may offer you a “Pre-qualification” or a “Pre-approval,” the Loan Approval or Commitment are really the important benchmarks when it comes to the loan contingency deadline.
A borrower will therefore want to discuss with their lender what is required of them to get a document from the lender that assures them the lender will provide financing.
Often lenders do not want to discuss appraisals and final underwriting until it gets closer to closing. This can be an area of contention between the borrower and the lender. If the lender has not finished underwriting, but has issued the approval or commitment, the borrower may be on the hook to purchase the house even when the bank is not yet fully committed to funding.
For more information on what happens if the lender does not commit to funding, read this.
For this reason, we suggest that borrowers discuss the issue with an attorney if their lender is not willing or able to give them a satisfactory commitment or approval, or if they want some help navigating this process.
If you have questions about obtain a loan commitment or approval, please contact us at mjacob@marcjacobesq.com or at 314.862.2237
Yes you are allowed to add an addendum to a “Standard” Real Estate Contract. We often help clients add one addendum or more.
Associations that generate standard forms generally have standard addenda to accompany those forms. Sometimes you can use those. In other cases, when either there is no access to such standard addenda, or there is none that fits your situation or purpose, your attorney can put together custom addenda to present to both sides for signature.
Buyers and Sellers should recognize that the protections offered in standard form contracts and addenda might not match up with the protections they would want in the deal. See our post on standard form contracts here.
Banks, relocation companies, institutional housing investors and other parties connected to a deal all have their own standard addenda that they may require to be attached and incorporated into any residential sale they are apart of.
Both Buyer and Seller should be aware that the right to attach such modifications to the contract is not exclusive to big parties, such as lenders and title companies. Buyers and Sellers also have this right and should feel free to exercise it upon the advice of their attorney, as appropriate to the circumstances of the deal.
If you have questions about addenda, or would like us to draft one for you, please contact us at 314.862.2237 or at mjacob@marcjacobesq.com
Putting Clients First. All of our Clients receive the personal attention they expect and deserve.
Marc Jacob, Esq.
141 N. Meramec, Suite 201
Saint Louis, Missouri 63105
Tel: 314.862.2237
Fax: 314.884.6041
Email: mjacob@marcjacobesq.com
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