Deed In Lieu Tax Consequences - YouTube

How does a deed in lieu affect my taxes? Welcome  back, I'm Ted Thomas. This episode is all about how

does a deed in lieu affect my taxes? Well, what is  a deed in lieu? Well, it simply means that someone  

is going to give a deed back to either a seller or  a bank, and if they do that, what's the tax concern  

on that? So, I'll come back to all that. So, I'm Ted  Thomas. I've been involved in tax lien certificates  

and tax deeds for about 25 years. I'm also going to  teach you a little bit about tax lien certificates,

tax deeds but most importantly, before I finish  this video, I'm going to explain 2 mistakes

that newbies make all the time at tax auctions.  So stay with me 'til the end because I want to  

show you how to save 25, 50 and even $100, 000  at a tax auction and not make a big mistake.

I'll be right back, stay tuned.

How does a deed in lieu affect my taxes? Well, that's really a tax question

and I'm not a CPA and I'm not attorney so  let's go through it from an experienced

person's viewpoint here. Usually a deed in lieu is  used when you're giving property back to a seller

or you're giving a property back to a bank. What  you're trying to do is you're trying to prevent  

going through the big foreclosure mess that  happens. All right now, tax deed properties  

are not the cream of the crop. These are usually  C's and D's, there's a few B's. All the A properties  

go sky high at auction so you're probably not  going to get one of those. I'm not suggesting  

you don't try, but the point is these properties  that we're buying, we're going to sell them with  

a contract to sale and we're going to sell them  into a used market. So, tax deed properties are  

not the best ones of all. Now, this property  tax business has been around for 200 years.

There's going to be plenty of property. This is a  business of abundance, way too many properties. As  

a matter of fact, most auctions, they can't sell all  the properties. All right, now every property in the  

United States that's not a church or a school, well  I can tell you right now, it's taxable. So the tax  

system is going to levy taxes. So the legislature  makes the rules, they then tell the treasurer at  

the county, "You levy the tax, you collect the tax.  If you can't collect the tax, you need to do a tax  

default at auction." Well, when you sell properties  at a tax defaulted auction, the county is going  

to sell them for peanuts. By that I mean, for back  taxes. You might be able to buy a property for 10,

20 cents on the dollar. I've had clients buy  them for 5 and 6 cents on the dollar  

but plan on spending 10, 20, 30, cents. If you go much  over 30 cents, well then you're going to get into  

difficulty in the selling. Now, all the property  owners have to pay taxes. Now, when they don't pay  

the taxes, this confiscation process is going to  take place. All right, if you buy those properties,

you're going to sell the property yourself or  you're going to sell it to someone else that's  

going to do that. Now, if you sell a property  yourself, some of your buyers are not going to pay  

you. If they don't pay you, well then they might  want to just give you a deed and give you the  

property back. So that's called a deed in lieu  of you foreclosing because they couldn't pay. 

So it's a deed in lieu of going through the legal  process of foreclosing. So, this happens all the  

time and if it does happen to you, it's an easy  process. You just tell them, "Give me a deed in lieu,"

you get your property back and then you can resell  it. Now, how does that affect the taxes? Well, on both  

sides, it has some effect. I'm not a CPA, I'm not  an accountant so I can't give you tax advice but  

I'm telling you if someone makes money, they are  going to have to pay taxes. The people losing money,

are losing the property are probably losing money  so they probably have a loss that they can take. I

can't give you a direction on that. Now, the county  treasurer is going to levy taxes. When they levy  

taxes and they don't get paid, an auction is going  to take place. When that auction takes place, you're

buying from the county. The county's going to give  you a deed to the property. Now, when you resell it,

that's where the deed in lieu will come in because  if you resell it and the people don't pay you, it's  

much easier to say to them, "Give me a deed in  lieu." In other words, in lieu of the foreclosure.

All right, the county seizes the property,  that's a perfectly legal process. When you  

sell a property, perfectly legal process. If the  people don't pay you, you would much prefer to  

miss the foreclosure process. Let's go back  and give you some foundational material.

The foundational material is this. Tax defaulted  auctions have been taking place for 200 years.

There are going to be thousands of properties come  up for auction this year. Now, in the United States,

they're going to be 5,000 auctions this year. That  means there's going to be thousands of properties.

When they're all added up, probably 2 to 3% of all the properties will go to some

kind of tax defaulted auction. So, learning  the process in real estate is difficult for  

most people. With tax liens certificates, it's very  easy, a very simple process. The county forecloses,

you buy it for pennies, you can sell it any way you  want. You want to sell it to a fixer-upper person,

you want to sell it to to another investor or you  maybe want to sell it yourself and be a banker.

So, you can be your own banker in this business.  All right now, I don't know where you are and what  

you know about tax liens and deeds but if you have  more questions, just put them below and I'll try to  

answer those for you. All right so let's go back  to the episode of today. How does a deed in lieu  

affect my taxes? I can't give you the exact answers  but I can tell you anytime there's a sale, a profit  

or a loss, that triggers profits and losses. So,  that needs to be handled by a CPA and someone's  

qualified. I personally am not an attorney or a  broker so I don't handle any of that, but I can  

tell you most sellers, that would be you once you  learn how to do this, most sellers will learn about  

a deed in lieu sometime within their first few  years. Because when you sell the property, someone  

might want to give it back. Well, if they don't want  to give it back, you'd have to go through a court  

process so you could offer them a deed in lieu of  you going through the court process. Most people  

don't want to have to get an attorney so they'll  give you a deed in lieu. If it triggers a profit, 

someone's going to pay a tax. If it triggers a  loss, they could be the same situation in the loss.

All right, I can't give you that advice because  I'm not an attorney. So profits and losses are  

always going to be taxed. All right, so how does  a deed in lieu affect your taxes? You need a CPA

and someone that's well versed in this subject  to get an accurate answer. I'm Ted Thomas, I'm  

going to answer a couple of questions before I go.  The question is does a bank offer a deed in lieu  

or do you have to request it? The homeowner is  struggling so you could suggest it to them and  

tell them, "If you don't want to go through  the foreclosure process, just deed the process, just  

deed the property back to me." All right, I'm not  an attorney so I'm not giving you legal advice.

This is a question that's only for people  in trouble. Our tax lien and deed training keeps  

people out of this kind of trouble but the point  is a deed in lieu is just so the lawsuit doesn't  

take place. The foreclosure will probably take  place anyway, however I don't know what the credit  

bureau is going to do whether they're going to  count the deed in lieu or not. But if you try  

to go and you haven't made your payments, your credit rating is probably pretty bad,

it's just going to get worse. Let's talk about  those 2 big mistakes that I mentioned earlier.

Now, these big mistakes cost people a lot of  money so here's where you want to be careful.

If you're headed off to the auction, you need to  give it a lot of thought before you get there.

Now, what kind of thought am I concerned about? I  don't want you to spend money that you don't know

what you're doing. So, don't buy a property or bid  on a property unless you've looked at the property.

That means eyes on the property, boots on the  property. You need to have looked at the property  

or have someone come and look at it for you so  that you know the property is there. If there was  

a hurricane the day before or there was a fire, you  need to take that into account. Why? Because if the

property's destroyed, at the auction you're going  to pay the county money, I don't know if they'll  

ever refund it if the property's been burned down  or whatever. So that's big mistake number 1. The  

big mistake number 2 is very similar. You go to  the auction, you're excited, someone outbid you so  

you don't want to go home empty-handed or you  don't want to leave your computer empty-handed

if you're doing it online, so you start bidding  on other properties which you haven't seen. 

Now, if you haven't seen those properties, that's  one problem and it's a big problem because now  

you probably haven't figured out an exit strategy.  So if you don't have an exit strategy, you don't  

want to bid. You could easily bid much higher than  the property's worth because you don't know the  

neighborhood and you haven't planned your exit  strategy. So those are 2 big mistakes. You'll  

save yourself a ton of money. They're not too  difficult but you need to pay attention when you  

go to auctions. Well, I wish I had more time but I'm  running out of time so I have a gift. G-I-F-T. I have  

a gift for you and it's going to help you take  control of your financial future. What is that gift?

I call it a quick start program and it's all about  tax lien certificates and tax deeds. Now, it's a  

2 part home study program, you can get started  right away talking about tax lien certificates in  

part 1, give you all the secrets there and then  in part 2, I'll show you how to make money. Now,  

you want to do this because you want to make  money and you make big money with tax deed

and tax defaulted property. So both of those are  included, I've been doing this for decades. You  

can get started right away with this free  gift. All you have to do is register below.