Investor Beware: New Vacant and Blighted Property Tax Liens.
Across the country, several jurisdictions are stepping up efforts to address the growing issue of abandoned and neglected properties.
States such as Washington, D.C., Maryland, and California have introduced or strengthened vacant and blighted property tax measures designed to encourage property rehabilitation — or at least discourage long-term neglect.
In these regions, property owners face steep financial consequences if they allow buildings to remain vacant or in disrepair.
Vacant properties can be taxed at rates as high as $5.00 per $100 of assessed value. Blighted properties can reach $10.00 per $100 of assessed value.
In Washington, D.C., for instance, the Vacant Property Tax includes an escalating multiplier based on how many years the property remains abandoned. Unsafe or blighted structures fall under separate, and often more severe, taxation categories.
Similarly, Maryland cities such as Baltimore City, Baltimore County, Frederick, and Salisbury have enacted local ordinances requiring owners to register vacant properties, often accompanied by higher tax rates or annual fees.
Why This Matters for Investors For investors eyeing HECM (Home Equity Conversion Mortgage) vacant property sales from HUD, these taxes can pose significant hidden risks.
HUD often holds vacant HECM properties for several years before auctioning them, meaning tax penalties can accumulate quickly. Since the tax penalty multiplier can increase from 2x to 5x to 10x annually, the unpaid tax bill at the time of sale can be substantial.
For example, a $500,000 property classified as vacant could incur $25,000 per year in additional taxes. A blighted property of the same value might face $50,000 per year in penalties.
These costs can dramatically affect an investor’s return — or even render a property acquisition unprofitable.
In my opinion, before bidding on or purchasing HUD or other distressed properties, it’s critical to perform thorough due diligence on local vacancy tax ordinances and potential outstanding liens. The goal of these laws is to revitalize neighborhoods, but for investors, they represent a serious financial consideration that cannot be ignored.
If you’d like to learn how to identify and mitigate these substantial tax liens before closing a deal, contact my office for expert guidance and due diligence support.
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Across the country, several jurisdictions are stepping up efforts to address the growing issue of abandoned and neglected properties.
States such as Washington, D.C., Maryland, and California have introduced or strengthened vacant and blighted property tax measures designed to encourage property rehabilitation — or at least discourage long-term neglect.
In these regions, property owners face steep financial consequences if they allow buildings to remain vacant or in disrepair.
Vacant properties can be taxed at rates as high as $5.00 per $100 of assessed value. Blighted properties can reach $10.00 per $100 of assessed value.
In Washington, D.C., for instance, the Vacant Property Tax includes an escalating multiplier based on how many years the property remains abandoned. Unsafe or blighted structures fall under separate, and often more severe, taxation categories.
Similarly, Maryland cities such as Baltimore City, Baltimore County, Frederick, and Salisbury have enacted local ordinances requiring owners to register vacant properties, often accompanied by higher tax rates or annual fees.
Why This Matters for Investors For investors eyeing HECM (Home Equity Conversion Mortgage) vacant property sales from HUD, these taxes can pose significant hidden risks.
HUD often holds vacant HECM properties for several years before auctioning them, meaning tax penalties can accumulate quickly. Since the tax penalty multiplier can increase from 2x to 5x to 10x annually, the unpaid tax bill at the time of sale can be substantial.
For example, a $500,000 property classified as vacant could incur $25,000 per year in additional taxes. A blighted property of the same value might face $50,000 per year in penalties.
These costs can dramatically affect an investor’s return — or even render a property acquisition unprofitable.
In my opinion, before bidding on or purchasing HUD or other distressed properties, it’s critical to perform thorough due diligence on local vacancy tax ordinances and potential outstanding liens. The goal of these laws is to revitalize neighborhoods, but for investors, they represent a serious financial consideration that cannot be ignored.
If you’d like to learn how to identify and mitigate these substantial tax liens before closing a deal, contact my office for expert guidance and due diligence support.
Subscribe to: