HOW LOCAL POLITICIANS MAY ENRICH THEMSELVES BY ACQUIRING TAX DELINQUENT PROPERTIES

 

Trey Mendez

It's not unusual for local politicians to increase their wealth by accumulating real estate.

One extremely profitable local option, especially for politicos with an access to capital to purchase properties and pay contractors, is to purchase tax delinquent properties not yet listed for tax auction.

Looking at the Cameron County Appraisal District's list of properties, it would appear that Juan Mendez III, a single man, has acquired at least four properties, former County Carlos Cascos ten properties and former County Judge and current State Democratic Chair Gilberto Hinojosa sixteen properties.

Historic Coca Cola Building Downtown Purchased After Paying Delinquent Tax Lien of $12,396.02

Now, we're not saying all these purchases were of tax delinquent or auctioned properties, but just as the Coca Cola Building was sold in that scenario, other properties may also have been acquired that way.

The unique opportunity to profit comes from bidding on tax lien properties at auction as those usually sell well below actual value.

Even when a property owner loses their property to an auction, they have one year to buy it back at the auction price plus 25%, plus "costs."

After one year, but before two years, the repurchase price changes to auction price plus 50%, plus "costs."

Those "costs" include any money the new owner must spend to secure the property, not including an addition or remodel.

But, if the roof leaks, the new owner may buy a new roof.  If the windows are broken, new windows.  If the door can't be secured, a new door or new locks.  All labor and materials are costs the new buyer must be reimbursed for should the former owner want to repurchase.

Just for illustration, a property is bought at an auction for $50,000 and the new owner spends $15,000 on a new roof, $5,000 on new windows and $2,000 on new doors and locks. 

That property can now be bought back in the first year for $50,000 plus 25% or $12,500, plus $15,000, $5,000 and $2,000 or a total of $84,500.

After one year, the buyback cost is $97,000.

Should a local property be merely tax delinquent, even with a tax lien, but not yet scheduled for auction, an interested seller would need to deal only with the current property owner, who is already under threat of their property being scheduled for auction unless they can come up with the delinquent tax amount.

When I last checked Cameron County was allowing properties to be tax delinquent for as long as eight or nine years whereas counties like Harris County (Houston) were sending properties to auction after a delinquency of only eighteen months.

Properties with delinquent taxes, but not yet listed for auction, can be "red-lined," that is scheduled for the next available auction.

While the county furnishes the public with lists of properties available for auction, there is not a list available to the public of properties "red-lined" for the next auction.

Linebarger, Goggan, Blair and Sampson, L.L.P. is the firm handling such tax auctions locally.

The whole tax auction, tax delinquent purchasing process is sort of a reverse Robin Hood situation, with the rich, who can afford the purchases, taking from the poor, who lose their properties because they can't pay their taxes.