An Evolutionary Step

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yogi
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Re: An Evolutionary Step

Post by yogi » 15 Apr 2019, 12:13

My home back near Chicago was a 1500 sq ft ranch with an unfinished basement. We had one full acre of land but only lived on about a third of it. I went to the assessor one year and asked if subdividing the property would lower my taxes. He said not likely. The year we moved down here to O'Fallon my Illinois real estate tax was $100 short of $10,000 per year. It would have been less if I didn't have a full brick house, but not that much less. My neighbor, the dentist, had a 5000 sq ft house and his annual taxes were less than mine. Then again, he knew a lot of people I did not have access to. The assessor said it was all due to the bricks, take it or leave it. My taxes here are around $3000 and have increased about 30% during the short time I've lived here. There is nothing missing here that I did not have up north, albeit less of it in O'Fallon. So, one of the big reasons I migrated out of Illinois is due to the atrocious taxes I had to pay. Then, too, this house is about half the quality of the house I left behind.

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Kellemora
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Re: An Evolutionary Step

Post by Kellemora » 17 Apr 2019, 10:12

Perhaps it is good that I moved south. I just checked to see what the RE taxes on the house I owned in Creve Coeur are presently, and last years paid tax bill shows it was 4800 bucks. That's a huge jump from my 1200 bucks my last year there.
What surprised me even more was the old brick house that was there before the subdivision was built. According to last years tax bill, they were paying 700 dollars per month rather than annually which comes out 8400 bucks, OUCH.

Maybe I had better quit complaining about paying double taxation down here, and it being triple what I paid back home. Based on what the family who lives in my old house is currently paying, I can't complain any longer, hi hi.

As my neighbors on the south side of the road sold their properties, they were forced to combine their two lots into a single lot, which really drove their taxes up. The city hounded me several times to combine ours and I told them no. They thought for sure when the original owner finally died they could force the issue again, but it was too late. I knew enough about real estate, and the necessary laws down here, that I managed to have the home drift from parents to children using the several step process which means there was no inheritance or sudden change of ownership.
It was a tricky deal to pull off, that required a few months to do, and then a five year period where it could have all been for naught. But we made it through not only five years, but for close to eight years, so were definitely in the clear and the old original deed still firmly locked in place, only with different names on it. No sale, no transfer, only deed name changes, which kept the original deed intact. This is tricky to do, but possible, if you have the time for the long wait period for it to become official. They key here is, the original owner must be alive and still living in the house for five years after their name is removed from the deed, else their name goes back on the deed and the new names become inheritors and will owe the taxes for same. At the time inheritance taxes were 48% of property evaluation, which I why I went through all that work. Currently, there is no inheritance tax, thanks to Trump wiping Obama's dastardly deed off the books. But the states still have some fees they've added while Obama was in office.

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yogi
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Re: An Evolutionary Step

Post by yogi » 17 Apr 2019, 15:53

I guess I was lucky that Barak Obama's home state was Illinois. The inheritance tax didn't kick in there until the value was in excess of $250,000. I had a need to know all that in 2008 a few months after he was installed as president.

You know way too much about real estate. LOL It's a good thing that you do too because a lot of people just take what their lawyer says for granted. I guess I shouldn't feel too bad after reading your observations about the home in Creve Coeur. That was a 4 fold increase for your house and mine only doubled. Then again, I was already paying $4800 when you were paying $1200. The bottom line is there was a time when the taxes doubled. Apparently it wasn't only a thing in Illinois.

My old house had two lots as well. The ten feet between my lot and the street belonged to the school district down the street from me. It basically was a 10x130 foot parcel of land that they gave to me so that I could access the roadway legally. That happened in December and the county decided I didn't have to pay real estate taxes that year for that small parcel. It was a damned good thing that I got it all in writing too because when we tried to refinance our mortgage ten years later it came up as unpaid taxes. The taxes due for that one month would have been around one dollar or less, but the potential for penalties and fines would have made it astronomical I'm sure.

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Kellemora
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Re: An Evolutionary Step

Post by Kellemora » Yesterday, 14:47

Inside the city limits of Saint Louis, I bought several all brick, two-story homes, in need of renovation of course, for between 6,000 and 18,000 dollars. If the lot was vacant, the lot alone would be worth around 20k to 30K. Almost all of these required a full gut rehab, meaning all new wiring and plumbing which is why other renovators wouldn't touch them. I was licensed in each of the trades, including general contractor. So I didn't have to hire out work to the expensive union tradesmen.

I also bought several home which were up to code, and had tenants living in them for 25k to 35k.
In fact, I bought 6 occupied rental homes once on the same day. Drove the Title Company crazy trying to handle that many in one sale in one day. Almost put me in the poorhouse also trying to do that many at once. But I simply could not pass up the deal I made.

County homes I paid considerably more for of course, but they were all already up to code before a small fire messed up the insides with soot. In most of those the structural fire damage was minimal, and easily repaired. But here too, there was always something that caused other contractors to shy away from buying them. Things that I could usually handle with ease.

Most renovators want to buy a house that needs little work, perhaps new windows and doors, a few small drywall patches, perhaps new siding, and carpeting. If it needs much more than that, they walk away, and by doing so cause the price to drop low enough I would grab it. Almost all the properties I ever bought were at REO Auctions, aka straight from the banks. Never buy a house on the courthouse steps or you'll be more than sorry later. Foreclosures will almost always come back at you for huge amounts of money, sometimes even loss of the house you bought that way.
The reason for this is in a Foreclosure you do NOT get a clean title. All encumbrances on the house come along with it.
While REO houses will normally come with a completely clean title, no back taxes or liens, etc., you buy it you own it, period.

There are a few folks who buy REO Auction houses for the sole purpose of reselling them right away, as is, with nothing done to them. This is another source of buying a house, with only a slight markup, usually whatever they think they can charge you for it. Most are happy if they can double their money overnight, hi hi. Heck, if they can get a 35k house for 6k and sell it for 12k the next day or week, they usually will. The only question is why is a 150k house being offered for 35k and end up being sold at REO Auction for 6k and resold for 12k?
Most of the time it is only because it needs the kind of work most renovators are not licensed to do. It costs a fortune to hire union electricians and plumbers to bring the house up to code. But if you are licensed yourself, and work for cheap, hi hi, you're in like Flynn.

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yogi
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Re: An Evolutionary Step

Post by yogi » Yesterday, 18:16

I think you did the right thing by obtaining all those trades' licenses. If you did the work yourself it had to take a lot of effort on your part to save those big bucks. It probably looks good on paper, but that's only because you weren't paying yourself what you were worth. My understanding is that REO homes are repossession property. Usually a bank won't want to pay off the liens and take on ownership. They are financial institutions after all and not real estate brokers. Regardless of how you did it, you knew what you were doing and that's all that counts.

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Kellemora
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Re: An Evolutionary Step

Post by Kellemora » Today, 10:06

Contrary to popular belief, banks actually double or in some cases triple their money on a foreclosure.
Believe me, they never lose money by foreclosing. They make it look like they do on the front end, but it's the bottom line that counts.

How a bankruptcy is supposed to work, and how it really works are as different as night and day.
Let's take a 75k house as an example, just to keep the numbers simple. There is only 25 left on the mortgage.
The homeowner has 40k of insurance on the home. A tree falls across the home causing enough damage the insurance company says it is a total loss and agrees to pay off the 25k mortgage, and the homeowner gets the rest.
The insurance on the home was acquired through the bank when they bought home, or for some other reason the bank now insured the home with the homeowner paying the bank for the insurance. Regardless of the reason, the home was insured as required by the bank.
The insurance company gets the payoff amount from the bank to clear up the mortgage.
The bank refuses to accept a lien payment on the house because they would then have to recalculate the payoff amount.
The insurance company drags it's feet, claiming waiting for paperwork from the adjusters.
Then they LIE and say the check to the bank was cut, a week before the date of foreclosure.
The bank claims they never received a check from the insurance company.
They again refuse a payment from the homeowner, saying everything is OK, it's in the works.
Two days later the bank forecloses on the house.

The very second the bank forecloses, the insurance policy becomes property of the bank. So it is the bank who now has insurance on the house. I'll get back to this part in a minute.

The bank places the home up for auction on the courthouse steps as a foreclosure. Buyers know the home is damaged, and still carries a 25k lien on the house, so the bids on the house, regardless of how high they go, the bank also bids on the house at its full undamaged value of 50k, which means they will automatically win the bid.
But it does not cost the bank anything to do this, because they are paying themselves the 50k, taking it out of one pocket and putting it back in the other pocket.
Now, since the house sold at Auction for 50k, and the lien was 25k, the homeowner should get back 25k. But he doesn't because it was not really a profitable sale since the bank bought it back, they claim it was now a double loss to them.

The bank then turns around and sells the home as an REO but does so through a private Bank REO Auction. Which is different than an REO sale which could have encumbrances. An REO Auction is always with a free and clear deed to the property. They sold it fairly low to get rid of it fast at auction, it fetched 15k.

OK, how much money has the bank made here?
They received 25k in payments from the homeowner, plus all the interest, bringing his mortgage down to 25k.
Let's say the interest they earned on the note so far was 10k.
They get the full amount of the insurance or 40k - 25k is applied to payoff the mortgage
They keep the 15k that should have been paid to the homeowner from the insurance payoff if they kept it legit.

So, what did the bank make on this deal.
The 15k the homeowner paid as a down payment to buy the house from the bank in the first place.
25k in mortgage payments, which had another 10k of interest paid so far over the life of the loan.
They paid out 50k buy the house at auction, but this is a wash for the bank, a major screw job for the homeowner.
40k from the insurance company.
15k from the REO private auction.

15k + 25K + 10k + 40k + 15k = 105k gross income - On a property they only had 25k owing on when they foreclosed.
They did have some expenses of course, but I doubt they were very much.

The bank could have still gone after the homeowner for the lien of 25k still owing, however, because they are the ones who bought it back on the courthouse steps, they in turn took responsibility for the lien on the house. So to save face, and not let people know how much they make on a foreclosure, they let the homeowner off the hook, but blast him to death to the three major credit reporting agencies showing they lost more than 25k due to suits and collection expenses.

Stashed away in a box here, I have all the paperwork for a couple of these foreclosures, attorneys letters, and applicable laws that let the banks get by with this.
Some good did come about by my going through this myself on one of my older properties. I learned how to buy houses dirt cheap with free and clear deeds, by seeking out the Private REO Auctions, but you have to have cash in hand to bid and make the deals. This doesn't mean you physically carry that much cash in the door with you, you make a deposit with the bank in a special account for the auction. You cannot bid over this amount, even if you have extra cash on hand with you for that purpose, they are sneaky that way. They don't allow two payment sources, one of their gimmicks. After the auction, they will cut you a cashiers check for the amount left in your account if you want. For a FEE of course, hi hi.

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