How to Buy a Tax Deed Property?

Are you interested in buying a tax deed property?

Tax deed properties are real estate properties sold to the highest bidder at a public auction due to non-payment of property taxes.

These properties can be a great investment opportunity, but the process can be overwhelming if you don’t know where to start.

This article will guide you through buying a tax deed property.

What is a Tax Deed Property?

A tax deed property is a real estate property sold at a public auction due to non-payment of property taxes.

When property owners fail to pay their property taxes, the county or state government can place a lien on the property.

If the property owner fails to pay their taxes, the government can foreclose on the property and sell it at a public auction to recover the unpaid taxes.

How to Find Tax Deed Properties?

The first step in buying a tax deed property is to find properties up for auction. You can find tax deed properties on the county or state government’s website.

Some websites offer lists of upcoming auctions, while others may require you to contact the county or state government directly.

Another way to find tax deed properties is to work with a real estate agent who specializes in tax deed properties. These agents have access to lists of upcoming auctions and can help you navigate the process.

How to do Tax Deed Sales Work?

Tax deed sales, or tax foreclosure auctions, are public auctions local governments hold to sell off properties with unpaid property taxes. Here’s how they typically work:

Property owners who fail to pay their property taxes for a certain period (usually one to three years, depending on the location) may have their property foreclosed on by the county or municipality.

The local government then takes possession of the property and may hold a tax deed sale to recoup the unpaid taxes.

The sale is usually open to the public, and bidders can participate in person or online, depending on the location.

The property is sold to the highest bidder, and the winning bidder receives a tax deed, a legal document that transfers ownership to the bidder.

The previous owner has a certain period (usually a few months) to redeem the property by paying the delinquent taxes, interest, and other fees.

If the property is not redeemed, the winning bidder takes possession of the property and becomes the new owner.

How to Prepare for the Auction?

Once you have found a tax deed property that you are interested in, it’s essential to do your research. You should visit the property and inspect it thoroughly.

This will help you determine the property’s condition and potential value.

You should also research the property’s title history to ensure no liens or other encumbrances on the property.

This can be done by contacting the county or state government or working with a title company.

Before the auction, you must register and obtain a bidder number. You must also bring a deposit, typically a percentage of the expected purchase price.

How to Buy Foreclosure Properties?

How to Bid on a Tax Deed Property?

At the auction, the bidding will start at the amount of the unpaid taxes. Bidders will continue to raise the bid until the highest bidder wins the auction.

It’s essential to set a budget for the auction and stick to it. It’s easy to get caught up in the excitement of the auction and overbid on a property.

If you win the auction, you must pay the purchase price balance within a specified timeframe.

You must also transfer the property title and pay any outstanding liens or fees.

Tax Deed Sale Example

Here is an example of a tax deed sale:

Let’s say that John owns a property in a county where property taxes are due annually and must be paid by the end of the year.

John fails to pay his property taxes for three consecutive years, and the county places a tax lien on his property.

After another year without payment, the county decides to hold a tax deed sale to recoup the unpaid taxes.

The county publishes a notice of the sale in the local newspaper and on its website, providing details about the sale date, time, location, and a list of the properties that will be auctioned off.

At the tax deed sale, interested bidders can participate in person or online, and the starting bid for John’s property is set at the amount of the unpaid taxes, which is $10,000.

Several bidders compete for the property, and the winning bid is $35,000.

The winning bidder pays the $35,000 and receives a tax deed, which transfers property ownership to them.

The previous owner, John, has a period (usually a few months) to redeem the property by paying the delinquent taxes, interest, and fees.

Suppose John fails to redeem the property within the specified time frame.

In that case, the new owner takes possession of the property and becomes responsible for any liens, mortgages, or other encumbrances.

The new owner can then decide to keep the property, sell it, or develop it as they see fit.

How To Invest In A Tax Deed Property?

Investing in a tax deed property can be an excellent way to acquire real estate relatively cheaply. Still, it’s essential to understand the risks involved and do your due diligence before purchasing.

Here are some steps you can take to invest in a tax deed property:

Research the local tax deed sales: Find out when and where tax deed sales are held in the area you’re interested in.

You can typically find this information on the county or municipality’s website holding the sale.

Attend a tax deed sale: Attend a sale in person or online to understand how the process works and what properties are available. Take note of the bidding process, the starting bids, and the final sale prices for properties that interest you.

Conduct your due diligence: Once you’ve identified a property you’re interested in, conduct your due diligence to determine its value and potential risks.

This may include researching the property’s title history, inspecting the property, and reviewing any liens or encumbrances that may be attached to the property.

Determine your maximum bid: Based on your research and due diligence, determine the maximum amount you’re willing to bid on the property.

Remember to factor in any costs associated with the purchase, such as closing costs and fees.

Bid on the property: Participate in the tax deed sale and offer on the property you’re interested in.

Be prepared for competition from other bidders, and stick to your maximum bid to avoid overpaying.

Take possession of the property: If your bid is successful, pay the amount owed and take control of the property.

Remember that tax deed properties are often sold “as is,” so you may need repairs or renovations before the property is livable or marketable.

Frequently Asked Questions

Q: What happens if the property owner pays their taxes after the auction?

A: If the property owner pays their taxes after the auction, the sale is typically canceled, and the bidder’s deposit is refunded.

Q: Can I finance the purchase of a tax deed property?

A: It’s unlikely that you can finance the purchase of a tax deed property. Most auctions require cash or a cashier’s check for the purchase price.

Q: Can I resell a tax deed property?

A: Yes, you can resell a tax deed property. However, it’s important to note that the property may have liens or other encumbrances that can affect its value.