DEAR MR. MYERS: When a home is sold at a tax-deed sale, how are the sale proceeds divided?
ANSWER: Tax-deed sales occur when a property owner fails to pay his or her annual property taxes or special assessments. In most areas, the home is sold at a public auction that’s coordinated by the county’s tax collector or assessor.
Bidding typically starts for the exact amount of the back taxes that are owed. But the bids can quickly escalate, especially if the property is in an area where home prices have steadily climbed.
Sale proceeds are used to reimburse the county for the unpaid taxes first, which includes any penalties or related fees. The remainder is then used to repay the mortgage lender for any of the property owner’s outstanding loan balances and legal expenses.
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If there’s any money left after that from the sale proceeds, the cash is forwarded to the owner who lost the house at the auction.
Some tax-deed sales are stranger than others. A young couple in Northern California quietly bought a privately owned street and its adjacent sidewalks in San Francisco’s exclusive community of Presidio Terrace at a tax auction about two years ago for just $90,100, after local officials put it up for auction because the local homeowners association hadn’t paid its $14-a-year tax bill – yes, just $14 – for about three decades.
The block-long street is lined by 35 megamillion-dollar mansions. Past residents include U.S. Sen. Dianne Feinstein and her billionaire husband, as well as Rep. Nancy Pelosi.
The couple who purchased the private street have suggested that they could now start charging rent for the parking spaces in front of each owner’s mansion – after all, the entire street is now their property. And if the mansion owners don’t want to pay, there’d likely be lots of folks in nearby communities who would happy to rent the spaces, because parking spots in San Francisco are both scarce and extremely expensive.
The millionaire homeowners in Presidio Terrace, who claim that they only found out about the two-year-old tax sale this spring, have asked the county’s Board of Supervisors to negate the sale. A hearing has been scheduled for October.
REAL ESTATE TRIVIA: A growing number of developers in cramped cities, such as San Francisco and New York, are now building parking structures for the permanent use of drivers. A single spot easily can cost more than $400,000, according to rate-tracking Colliers International, and other reports say that some are being resold for nearly $1 million.
DEAR MR. MYERS: A for-sale ad that we saw states that the home has a new “garburator,” but the term isn’t in our dictionary. What is it?
ANSWER: My guess is that either the seller or the agent who placed the advertisement is from Canada. A “garburator” is the term that Canadians use to describe what we Americans call a garbage disposal.
DEAR MR. MYERS: Home prices and sales have been going up for a long time in our neighborhood, but they’re starting to slow down. We put our home on the market for $232,995 in July and got an offer for $225,000, but we had our sales agent make a written counteroffer for $228,000. The buyers didn’t respond for 15 days, and now we have an offer from a new buyer for the full $232,995 that we wanted. The first buyers now say they will accept our previous counteroffer for $228,000, about $5,000 less than the deal we accepted from the new buyers. Can the first buyers sue us if we don’t sell the house to them for the lower price?
ANSWER: They could sue, but it’s doubtful that they would win.
Assuming that the counteroffer your agent made to the first would-be buyers was on a standard realty form, it included a boilerplate “time is of the essence” clause that required them to either accept or reject your counteroffer within a specified period of time. The typical clause requires the buyer’s response to come within 48 or 72 hours.
If the buyer doesn’t make a written decision to accept or reject the counteroffer within the allotted time, the counter is automatically voided and the seller is free to accept any offer from a different buyer.
Review the written counteroffer that your agent made. If it includes a clause that requires the first buyers to respond within two or three days, they have no legitimate grounds to sue because their deadline has passed. But even if it doesn’t and the first buyers sue, it’s doubtful that a judge would rule in their favor because it would cause undue hardship on you and the new buyers alike.
Your letter, though, serves as a reminder that both buyers and sellers always should put a reasonable time limit on an offer or counteroffer. It will prompt each party to make a decision quickly, reducing the chance that a lawsuit or other problems will occur weeks or months later.
David W. Myers’ column is distributed by Cowles Syndicate Inc.