Are Tax Lien Investments the Latest Real Estate Ripoff?

November 23, 2013  //  By:   //  Op-Ed  //  2 Comments

The fallout from the 2007-2010 foreclosure crisis in America won’t be fully understood for years to come. But there is one scam born of the real estate mess which is ensnaring both homeowners and investors. That scam involves tax liens, placed on real property for various reasons, then purchased by investors who are looking to cash in a distressed property.

This presents two very unique problems, with one being that the homeowner is now being penalized twice for what’s generally considered the same delinquency. That’s debatable, however, because their lack of ability to pay for the lien and taxes on their property will have to be rectified one way or another. That being said, there’s no shortage of advocates for the distressed homeowner who claim that these delinquent tax liens have no business being sold on the open market. The National Consumer Law Report said the following in a 2012 report:

“Inadequate notice and a lack of judicial oversight over the process leave many homeowners in the dark about steps they can take to avoid a home loss. Homeowners most at risk are those who have fallen into default because they are incapable of handling their financial affairs, such as individuals suffering from Alzheimers, dementia, or other cognitive disorders.”

The same article from AllGov.com that most recently published this quote also details just how one-sided these tax lien investments and resulting foreclosures can be:

A homeowner may owe less than a thousand dollars on a house worth $200,000, and yet it may be sold at a tax lien sale for the amount of the tax that is owed. The lien buyer, be it a bank or a speculating investor, makes a huge profit, while the homeowners lose not just their home, but the equity that might represent their life savings.

This seems like a guaranteed windfall profit for investors, but this is deceptive. Many unscrupulous companies that actually buy and resell these tax liens to the end investor do not even understand the process and make wildly untrue promises to their customers. Tax and foreclosure laws vary greatly from state to state and have quite obviously changed drastically since the most recent foreclosure crisis. Yet these tax lien investment companies, such as PIP Group, headed up by Don Fullman and Charles Sells continue to sell their customers on tax lien investments across state lines.

One frustrated customer of PIP Group who invested heavily in tax liens that were not eligible to use as foreclosure collateral said they contacted PIP numerous times and have had absolutely no luck getting any restitution or even an explanation for why these investments have all failed to produce any profit.

It’s likely that many of these bunk investments go unreported due to the nature of the investor and the complicated process which strings them out and leaves them in the dark, without a resolution.

PIP Group is just one of the many tax lien companies with customer complaints and those numbers appear to be growing every day. (Gord Brody – VNN) (Image: Flickr | 666isMoney)

 

 

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