In-House Foreclosures. Valerie Curry, Orange County Lorie Domnas, Durham County Anne Vinski, Durham County Chris McLaughlin, SOG

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1 In-House Foreclosures Valerie Curry, Orange County Lorie Domnas, Durham County Anne Vinski, Durham County Chris McLaughlin, SOG

2 When to consider foreclosure When your governing board has passed a resolution allowing In-Rem Foreclosure When the tax lien has been advertised When you have developed relationships with the Clerk of Court and Sheriff s Civil Division When your staff is qualified to do so When all other collection efforts fail

3 The Machinery Act Says Remedies against Personal Property (b) says that At any time after taxes are delinquent and before the filing of a tax foreclosure complaint under or the docketing of a judgment for taxes under the tax collector may levy upon and sell or attach the following property for failure to pay taxes

4 In other words. We should try all remedies of collection on personal property before the docketing of a judgment, or we will lose the opportunity to do so. The Judgment must be docketed for 3 months before taking property to sale

5 Have all other collection efforts failed? Wage Garnishment Bank Attachment Rent Attachment Debt SetOff Escheats Levy

6 Wage Garnishment What might keep you from using this method? Cannot obtain a Social Security Number on the Taxpayer No reported information with the Employment Security Commission Very little income reported at ESC Cannot get the company to respond to or comply with the garnishment.

7 Wage Garnishment Issues How can you overcome these problems? Develop a stern follow up letter to the employer explaining the consequence of non-compliance

8 Overcoming Wage Garnishment Issues Train all staff on techniques for acquiring employer information on taxpayers who call in or come in. (i.e.) Have a payment agreement application that includes spaces for Banking information, Employment Information, and Social Security Number

9 Overcoming Wage Garnishment Issues If you have a Social Security Number, participate in Debt-set off. Self-employed individuals may not report to ESC but they do generally file taxes with the Department of Revenue (and play the lottery!)

10 Bank Attachment What might keep you from using this method? Taxpayer always pays cash or credit card No Bank information on system The bank will not respond or comply

11 Overcoming Bank Attachment issues Serve a bank attachment to all of your local banks with your taxpayer s name and social security number

12 Overcoming Bank Attachment Issues Develop a bluff bank attachment letter to send to the taxpayer

13 Overcoming Bank Attachment Issues Develop a stern letter for the bank explaining the consequences of non-compliance Or call the bank!

14 Rent Attachment How do you know the taxpayer owns rental property? - Things to look for: - Owns multiple properties - Mailing address is different than property address - Accurint search for property address shows separate individual than taxpayer residing on the property - Field visit

15 Rent Attachment Talk with the tenant! Do they pay to a property manager or directly to the owner? If they pay to a property manager, serve them also. When the tenant is served they tend to start making phone calls to the owner or property manager so let them help you!

16 Escheats Garnishment Be sure the taxpayer does not have unclaimed property located at the North Carolina Department of State Treasurer s office The treasurer s office pays out 2.5 Million dollars a month and currently has 60 Million in unclaimed property.

17 Levy Problems Taxpayer does not own personal property Taxpayer does not own valuable personal property

18 Overcoming Levy Issues If they own personal property that is not valuable (in your opinion) that does not mean that THEY don t consider it valuable. That old boat passed down from Great Uncle Junior might have some real sentimental value to your taxpayer. You can send a pre-levy letter that states the intention of levy and sale of their property to see if that prompts them to pay their delinquent taxes.

19 Pre-foreclosure Notice It can be very easy to determine if there is a mortgage lienholder on the property without doing a full title search Often times a pre-foreclosure notice sent to the lienholder will result in the taxes getting paid.

20 All other collection methods have failed. What is next? Send in the Tough Guy?! No! Consider the type of property you wish to foreclose. Will it be marketable? What is the risk?

21 Deal or No Deal? This taxpayer owes $3,100 for their 2009 Taxes

22 What if This taxpayer has a NC Department of Revenue lien docketed on March 15, 2008 for $455,000? This taxpayer owes $3,100 for their 2009 Taxes

23 What if.. This taxpayer has a North Carolina Department of Revenue lien docketed on February 2, 2009 in the amount of $500,000? This taxpayer owes $3,100 for their 2009 Taxes

24 What if.. This taxpayer has an IRS lien docketed December 12, 2008 in the amount of $65,000 This taxpayer owes $3,100 for their 2009 Taxes

25 Priority of Tax Liens Federal tax liens Local real property tax liens have priority over federal tax liens regardless of when the Federal lien was docketed. State tax liens First in time, first in right. County tax liens attach to real property on Jan 1 of each year. The State lien attaches when it is recorded in superior court.

26 New Scenario: County taxes are delinquent for $3, $3,900 NC Dept. of Revenue lien docketed February 12, 2008 for $45,000 What is the order of priority?

27 Deal or No Deal? This taxpayer owes $1,200 for tax years

28 What if? The adjoining property is owned by another person who owns all the property in the area except this tract. This taxpayer owes $1,200 for tax years

29 What if? This tax record picture is outdated the structure has been torn down. There is a $12,000 demolition lien from the City recorded. The Assessed Value of the property is currently $2,400 This taxpayer owes $1,200 for tax years

30 Deal or No Deal? This taxpayer owes $537 for tax years

31 What if? You were able to locate potential bidders, such as: Hunters Conservations groups preserving wetlands Universities and land trusts who need swamp property for research purposes North Carolina Waterfowl Impoundment

32 Deal or No Deal? This taxpayer owes $1,200 for tax years

33 What if? There is federal funding available for clean-up of contaminated properties There is a need for this type of business in the area and therefore potential interest from Exxon, BP, etc. This is a historical site that could be made into a landmark/museum

34 Things to help you identify if a property is marketable for foreclosure. GIS

35 Things to look for with GIS Street access? Who are the surrounding owners? (and do they pay their property taxes?) Proximity to highways, trains (noisy areas) GIS can help you narrow down which properties you will want to field visit.

36 Things to help you identify if a property is marketable for foreclosure Field Visit

37 Things to look for on a field visit General condition of the neighborhood General structural condition of the dwelling Access to the property Debris

38 What can happen when you proceed to foreclosure without a field visit This house was slated for foreclosure in Durham County. This was the picture Durham had on file.

39 Where Durham went wrong Durham did not do a field visit before turning this over for foreclosure because the neighborhood was good, the tax value was good, and although the picture showed the need for some paint, the house seemed to be in decent shape. The house did not sell at foreclosure and Durham County became the owner.

40 Durham did not anticipate what they found on the property A boat, A trailer, and some sort of appliances An RV A Van, Clothing, Toys, A Bus, A Car, car batteries, Wood, scrap metal Furniture The inside was also completely trashed!

41 Durham had to clean up the property Approximately $20,000

42 But Wait! There s more A few months later People were dumping on the property again

43 Guess how long Durham was stuck with this property? 4 years 4 years of keeping the property clean, the grass cut, being liable for any injuries that might occur on the property, and not having the property on the tax rolls

44 The moral of the story You MUST do a field visit Even though this house had potential, there was so much trash to be removed that it scared off potential bidders. Even if the picture on your system was taken yesterday, someone may have started dumping on the property Today! A field visit is a vital part of your identification of properties for foreclosure.

45 You have identified property for foreclosure. Now what? A judgment cannot be docketed any earlier than 30 days after the lien was advertised. NCGS (b) Prior to docketing the judgment, notice of tax lien foreclosure must be sent to the taxpayer and all lienholders of record NCGS (c)(1) Service to the taxpayer must be sent by certified mail NCGS (c)(3)

46 What is your timeline? Real Property Delinquencies Advertised Notice of tax lien foreclosure is sent to taxpayer and lien holders (30 days) Docket tax lien with Clerk of Court (90 days) Request for Execution to Clerk/Execution issued to Sheriff, sheriff sends Notice of sale to listing owner (30 days prior to sale) Notice of sale is posted at the courthouse and published (at least 20 days prior to sale) Sale is conducted by the Sheriff and property is sold subject to upset bid process

47 Sounds Easy! Possible problems that may arise

48 Service Issues If you do not get the signed certified mail green card back from the taxpayer According to NCGS (c)(4), if a return receipt from the certified mailing is not received, the tax collector shall do both of the following:

49 NCGS (c)(4) Make reasonable efforts to locate and notify the taxpayer and lienholders of record prior to docketing of judgment (which may include posting notice on property and mailing notice by first class mail Have notice published in newspaper of general circulation in the county once a week for two consecutive weeks naming all unnotified lienholders and the taxpayer that a judgment will be docketed

50 Is there another way? Getting personal service on the taxpayer using service by Sheriff Using Fed Ex or UPS or service that requires the taxpayer to sign

51 Title Search Issues The title searcher must be trained! Missing a lien or a lienholder and not serving the appropriate parties can be detrimental. The County and City of Durham vs. Edgar R. Daye et al

52 Durham v. Daye This was a mortgage style foreclosure. The outside attorney firm handling the case failed to notify one of the heirs to the property, despite the fact that he was listed on the death certificate and was also the Administrator of Mr. Daye s estate. The person who purchased the property at sale spent $58 K to fix it up. The Daye heirs sued and the court set aside the sale because of lack of Notice. Ownership reverted back to the Daye family who have subsequently been sued by the person who purchased the property at sale for the amount that she spent to improve it ($58,000)

53 Title Search Issues Heir property who are the heirs? How do you find them?

54 Tips for locating Heirs Get information from an Estate file (if one is filed) Get information from an Obituary Sign up for Ancestry.com (obituary section) Talk to relatives of the deceased If the deceased had a Power of Attorney, locate that person and ask questions

55 Title Search Issues There is a break in the chain of title. Sometimes you will discover the problem ( i.e property should have transferred by deed or will) and it can be corrected by your land records department Sometimes the problem is not one that you can solve. In this case you may not be able to proceed depending on the issue.

56 Personnel Issues You don t have anyone on staff who can work exclusively on foreclosures. Not a problem! Look at Orange County s statistics

57 Orange County s Foreclosures

58 Overcoming your fear of handling foreclosures You don t want to put people out of their home. Remember, you have already tried every other collection method. This is a last resort. Sometimes this process will bring the help that the taxpayer needs to get current.

59 Overcoming your fear of handling foreclosures You do not know how to do a Title Search You can overcome that fear!

60 Overcoming your fear of handling foreclosures Most community colleges have programs that teach title searching. Many paralegals who spend time in the deed vault doing title searches would allow you to shadow them to learn. Build relationships! Consider outsourcing your title search needs to a free-lance paralegal if your budget will allow.

61 Overcoming your fear of handling foreclosures You are afraid that you will not be able to determine and locate all interested parties.

62 Who has an interest in the property? All lienholders : mortgage holders, judgment creditors, IRS, NC Dept. of Revenue Side Babies The wife that doesn t appear on any legal documents (but is still entitled) The remainderman

63 Overcoming your fear of handling foreclosures Document your research Ask questions of family members and neighbors Ask questions of the taxpayer that will help you locate the mortgage company (like getting the loan number, address, etc.) Open communication and a thorough title search will likely give you the information you need.

64 Overcoming your fear of handling foreclosures You are afraid of complying with the service requirements.

65 Overcoming your fear of handling foreclosures Utilize your resources (Accurint, DMV etc) to find good addresses If the taxpayer refuses all service attempts, GS (c) authorizes the collector to Notice by publication

66 Remember: If you determine that the problems (locating everyone, service, marketability) are too great, you do not have to proceed.

67 However, once you have established a successful In-Rem program, most properties will be resolved prior to sale or result in a successful sale. So when all other collection remedies have failed, and you understand the process and procedures, In-Rem is a good Deal!