How To Buy Real Estate At Tax Sale

Buying tax delinquent property at tax sale is a profitable land buying method. However, buyers sometimes pay too much for the property or buy real estate that has serious title problems. Often the purchased property is not as expected, it may be inaccessible, a steep hillside, desert or undesirable in some other way. Follow the steps below to avoid these problems.

Tax Sales Process

Property is sold by the county for delinquent taxes. It often takes five years of delinquencies before the property is sold. Some states sell tax certificates. In this case you are buying the tax debt from the county not the property. We will focus on states that conduct auctions.

After meeting the requirement (number of years of delinquent taxes) the auction is held. Like any auction, the property is sold to the highest bidder. It is usually held annually at the local courthouse.

Property owners can redeem the property anytime before the actual auction. This means that the preparation and research I will describe below may be wasted if the property is redeemed before the sale.

Buy Before Property Tax Sale

Before going through the steps I want to share a great strategy to buy tax delinquent land. Contact the owner before the sale and offer to buy for a small amount. Then pay the taxes and you will own the property before the sale. Many owners will jump at the chance as they know they are about to lose the property.

This may not always be to the advantage of the seller as they are entitled to any proceeds from the auction above what is owed in delinquent taxes.

Check For Clear Title

Always have the title of the property checked before making a bid. This takes preparation and you will need to contact a title company before the auction. My title company is often contacted the day before the sale to check the title. That is not enough time to do a title search.

Many people buy property at the auction, discovering later there are title problems. The land may have loans, liens or other title problems. Don’t buy without knowing the title condition.

Visit Tax Deed Sale Property

Visit the property before the tax sale. Know what you are buying. There may be a reason the property is going to tax sale other than the owner can’t afford the taxes. The owner may know that the property has no legal access, is a steep mountain, or a sand dune.

Determine Property Value

Know the approximate land value of any property you want. It is easy to pay more than the property is worth at an auction.

Check Real Estate Listings

I have seen property sell at a tax deed auction for 2 or 3 times what adjoining property is listed for by a realtor. The listed property is not only cheaper but you also receive clear title, and have a realtor to do much of the work and show you the property.

Why buy real estate with title problems if you can buy property through a realtor cheaper and without title problems?

Avoid Auction Fever

Most importantly avoid auction fever. Auctions are exciting and it becomes a competition to win. Many bidders do it for fun with no idea what they are buying. Focus on a couple of properties and don’t pay more than they are worth.

Tax auctions have become so popular that owners are now buying property and intentionally not paying the taxes. When the real estate is sold at auction they receive any money above the delinquent taxes. If the property sells for a good price they clear a nice profit.

A Tax Deed Sale can be a great opportunity to get property at a great price but only if you prepare by doing your research before the auction.

How To Lower Your Real Estate Taxes

We all pay taxes, we all pay too much. Unlike most taxes you may be able to lower your real estate taxes.
The property tax is a total of the various taxing entities that assess taxes on your property. These include counties, cities, school districts, and special districts. In many areas these taxes are collected by the local county and disbursed to other taxing entities.

Each taxing entity sets its own tax rates. You can attend the annual public hearing to voice your opinion on the tax rates, but this is not the best way. The taxing entity will set the rate based on how much money they think they need. Your protest is usually a waste of time.

Challenge Market Value to Lower Property Tax

Challenging the market value of your property, as determined by the county, is the way to lower your property tax. Each property is appraised and the tax rates applied to that appraised value.

By having the property value lowered, the taxes will be lowered. The county or city sets the property value which all the taxing entities use. They are supposed to use the actual value of the property but for a variety of reasons the value can be incorrect.

One Warning. If the county assessed value is less than the value of your property, count your blessings, and do nothing. On the other hand, if the assessed value is higher than the actual value you can do something about it, but do it the right way.

I have seen people approach a county and ask for their property taxes to be lowered. Their reason may be “I think they are too high” or “You raised them by 20%”, this won’t work. You need proof to force the county to lower the taxes. You need to prove the county assessed value is wrong.

Recent Closing Documents

If you purchased the property recently, use your closing documents. The documents show the purchase price, proving the county value is too high.

Property Appraisal to Prove Value

If you’ve owned it longer you need a property appraisal to prove the assessed value is high. The county doesn’t like to lower values as it lowers their tax revenue. Be firm and have your proof when presenting your complaint.

With the recent banking crisis and collapse of real estate prices it is likely your real estate taxes are too high. The county is required to assess property at actual market value. If you prove the assessed value is high the county is required to lower it, lowering your taxes. Use your recent closing documents or an appraisal to prove the county assessed value is high.

Category: Property Taxes

Buying Real Estate at Tax Sale