Don't Lose Your Florida Property! How a Hard Money Loan Can Stop a Tax Deed Sale

Facing a Florida property tax deed sale can be a terrifying experience. If you've fallen behind on your property taxes in Florida, the county tax collector can sell your property to recover the unpaid debt. This process can lead to you losing your home or investment property, even if the amount owed is significantly less than the property's value.

However, there's a potential lifeline: a Florida hard money loan. This article will explore how a hard money loan works and how it can be a strategic tool to stop a Florida property tax deed sale and help you regain control of your real estate.

Understanding the Florida Property Tax Deed Sale Process

First, let's briefly outline how a property tax deed sale occurs in Florida:

1. Delinquent Taxes: Property taxes in Florida are typically due by a specific date each year (usually March 31st). If these taxes remain unpaid, they become delinquent.
2. Tax Certificate Sale: The Tax Collector holds an auction (typically on or before June 1st) where tax certificates are sold for the amount of the unpaid taxes, plus interest and costs. The winning bidder is the one who agrees to pay the taxes and accept the lowest interest rate.
3. Tax Certificate Holder's Rights: The tax certificate holder doesn't own the property but has a lien on it. The property owner has a period (usually two years from the date of delinquency) to redeem the certificate by paying the holder the original amount plus accrued interest and penalties.
4. Applying for a Tax Deed: If the property owner fails to redeem the tax certificate within the statutory period (after two years from delinquency and before seven years from the original issue date), the certificate holder can apply for a tax deed sale. This initiates a public auction of the property.
5. Public Auction: The Clerk of the Circuit Court and Comptroller conducts the tax deed sale. The property is sold to the highest bidder. The proceeds are used to pay off the tax certificate holder, any other liens of record, and the remaining balance, if any, goes to the former property owner.
6. Loss of Property: Once the tax deed is issued to the winning bidder, the former property owner loses all rights to the property.

Key Takeaway: The timeline can move quickly once a tax certificate holder applies for a tax deed. You need to act fast if you want to prevent the sale.

What is a Florida Hard Money Loan?

A hard money loan is a short-term loan secured by real estate. Unlike traditional bank loans that focus heavily on the borrower's creditworthiness and income, hard money lenders primarily focus on the value of the underlying asset (the property itself).

Here are some key characteristics of hard money loans:

• Fast Funding: Hard money lenders can often provide funding much faster than traditional banks, sometimes within days or a couple of weeks. This speed is crucial when facing an imminent tax deed sale.
• Asset-Based Lending: The loan amount is primarily determined by the property's value, often based on its after-repair value (ARV) if the borrower plans to renovate.
• Shorter Terms: Hard money loans typically have repayment terms ranging from a few months to a few years.
• Higher Interest Rates and Fees: Due to the higher risk and shorter terms, hard money loans usually come with higher interest rates and origination fees compared to conventional mortgages.
• Less Stringent Credit Requirements: While not entirely ignoring credit, hard money lenders are more flexible with credit scores as the loan is secured by the property.

How a Hard Money Loan Can Stop a Florida Tax Deed Sale

A hard money loan can be an effective tool to stop a Florida property tax deed sale by providing you with the cash needed to redeem the outstanding tax certificate and any associated costs before the auction occurs.

Here's how it works:

1. Identify the Amount Needed: Determine the exact amount required to redeem the tax certificate. This includes the original delinquent taxes, accrued interest, penalties, and any fees associated with the tax deed application process. Contact the County Tax Collector's office for this precise figure.
2. Find a Florida Hard Money Lender: Research and contact hard money lenders who operate in Florida. Look for lenders with a reputation for speed and reliability. Some active hard money lenders in Florida include:
3. Apply for the Loan: Be prepared to provide information about your property, the amount needed to redeem the tax certificate, and your proposed repayment plan. Hard money lenders will typically want to assess the property's value quickly.
4. Secure Funding: If approved, the hard money lender will provide you with the necessary funds.
5. Redeem the Tax Certificate: Immediately use the loan proceeds to pay the Tax Collector the full redemption amount. Crucially, this must be done before the final payment is made by the winning bidder at the tax deed sale and the tax deed is signed by the Clerk.
6. Repay the Hard Money Loan: You will then need to repay the hard money loan according to the agreed-upon terms, which will likely involve a shorter timeframe and higher interest rates. Your strategy should involve either refinancing the hard money loan with a traditional mortgage or selling the property to pay off the debt.

Important Considerations

• Act Quickly: Time is of the essence. Once the tax deed sale process is underway, the window to redeem the property narrows rapidly. Contact lenders immediately.
• Understand the Costs: Be fully aware of the interest rates, fees, and repayment terms associated with the hard money loan. Ensure you have a viable plan to repay the loan to avoid further financial distress.
• Property Value: The hard money lender will assess your property's value. Ensure you have a realistic understanding of its worth.
• Exit Strategy: Have a clear plan for how you will repay the hard money loan. This could involve refinancing with a conventional lender, selling the property, or other means.
• Legal Advice: It's always advisable to consult with a real estate attorney in Florida who has experience with property tax issues and hard money loans to understand your rights and options fully.

Conclusion

Losing your Florida property due to unpaid taxes can have severe consequences. A Florida hard money loan can provide a crucial, albeit potentially expensive, short-term solution to stop a tax deed sale. By acting quickly and understanding the process, you can leverage the speed and flexibility of hard money lending to redeem your property and avoid losing your valuable real estate asset. Remember to carefully consider the costs and have a solid plan for repaying the loan.

Contact AHL Hard Money Network today to get started!