It's difficult for Real Estate Investors to find the absolute perfect set of circumstances while searching for a home to flip. On occasion, we even run across homes with Municipal liens. Now the question is, if a property has Municipal liens is it worth buying? Many investors won't touch it with a ten-foot pole. Let's go into a bit more detail here and see what the best answer is.
Homes can have liens attached to it for many different reasons. Municipal liens are perhaps the most commonly applied especially to dwellings facing neglect. For example, a homeowner may run into financial difficulties possibly resulting in pre-foreclosure and are unable to maintain their property resulting in the place being an eyesore to the neighborhood. In some cases, trash may be left out posing even possible health issues. The local municipality will often step in attempting to help keep the community clean.
It would make total sense to go through with purchasing the property if the liens are reasonably negotiated down. Calling the local municipality office to discuss options is a fantastic way to approach the situation. The reason for this is the municipality would be happy to have the property cleaned up and have it add value to the local community. For this reason, you will find many people in the municipal office willing to work with you to find a resolution. Not only will it add value to the community but it will also cut down on the extra work in the office due to complaints from Neighbors.
Some homes have had their liens reduced with the city drastically by approaching the right people and negotiating correctly. For example, a property in Margate with $857,000 in liens from violations reduced to $6,000 through negotiation. A home in Coral Springs with $757,000 in liens came down to $13,000. Another example in Lauderhill having $257,000 in liens dropped to $1,250 using these strategies. The reductions are significant and can play a huge role when it comes to profitability in flipping homes especially in probate sales.
Municipal violations often start as minor offenses, but they can carry a hefty price tag. It's seen a lot with probate properties too. The real purpose is to deter violators and help maintain a standard within communities. Infractions may be handled differently according to the state you're in, but in Florida, Violations or liens are created by F.S. chapter 162. This branch is known as the Local Government Code Enforcement Boards Act. The enforcement officer issuing the violation is required to give the homeowner a reasonable amount of time to correct the infraction. If it's not fixed within the time frame allowed the board can issue fines up to $250 a day. If the homeowner chooses not to correct the situation within the allotted time frame and decides not to pay the penalties, they will issue liens on the home. Examples of infractions could be:
- Broken Windows
- Property In Significant Disrepair Or Health Hazard
- Piles Of Trash Left In The Yard
- Roof In Visible Need Of Considerable Repair
A house with Municipal liens is still worth purchasing for an investor especially if they can be negotiated down to a reasonable price. Knowing who to work with at the city municipal office is also helpful because they will know that your interests are to correct the violations as quickly as possible. In some situations, you may need to purchase the home first depending on the circumstances.