Tips Before and After Buying Tax Sales Properties
There are clear risks and benefits to buying tax sales properties. While there is a chance to profit, pick the wrong property to bid on, and you could end up with a lemon. The more you understand the tax sale process and what is or is not allowed, the more prepared you will be to navigate the way to a winner.
For investors and aspiring homeowners looking to get into bidding on tax sale homes, here are some tips before and after buying a tax sale property you may want to entertain.
Start By Reviewing Municipal Tax Sale Rules
The first step before buying a tax sales property is reviewing the rules. Look at the municipal tax sales rules to understand how tax sales are held, what the municipality is expected to do, and what the purchaser or bidder is expected to do.
Decide You Won’t Bid Above Your Budget
Though tax sale homes have minimum bid amounts well below market value, they are also often purchased for far more than advertised as a minimum. Be sure that you operate within your financial means when submitting a bid by public tender or auction, and do not overbid above where you’re comfortable.
Adhere to the Rules When Submitting a Tender
If you do not closely follow every rule regarding tender submission, you can easily discover that a tender has been rejected.
Don’t Skip Out On Doing a Title Search
A title search will indicate definitively if there are any liens or claims on a property. It’s a necessary part of due diligence. Do not underestimate the value of a title search.
Even With Liens, a Tax Sale Home May Be Worth It
If you discover a property has liens, it does not mean to automatically not bid on it. Decide for yourself whether it’s worth it. In some cases, the taxes owing, the liens, and your bid amount may still add up to far less than the property’s assessed value.
Inspect a Tax Sale Property Visually From The Road
Though you cannot do a home inspection, you can inspect a tax sale home from the road and/or public property. Never trespass, as you can be charged. The rules surrounding buying tax sale properties are extremely strict about this.
Do All The Research You Can About the Property
Arguably, more important than trying to evaluate a property from the road is doing the administrative research behind it. Identify environmental or contamination concerns. Look up land use restrictions, zoning information, planning information, building information, permits, property access information, work orders, property occupancy, and more.
Arrange More Than Enough Financing to Cover Costs
Not only do you need a 20% deposit of the tender amount to lock in your bid, but additional costs will present if you are proclaimed the purchaser. A tax sale home may need renovations, or there may be fees, such as land transfer taxes, that are not included in the bid amount that has to be covered. Ensure you’ve acquired enough financing to fully cover and support the purchase of your tax-sale home.
Even If It’s a Profitable Tax Sale Investment, There Will Probably Be a Fix Or Two
Some maintenance troubles are likely present if someone is having trouble paying their property taxes. Many tax sale homes face this predicament, meaning expect renovations and repairs before pursuing any plan to live in it or flip it for a profit. Don’t let this discourage you, either. Profitability with a tax sale property is in managing these types of expenses.
Be a Problem Solver As You Become Purchaser
The tax-sale property is sold to you after the deed is registered and money has changed hands. There is no backing out. In that respect, whether it’s a leaky basement, leaky roof, damage done by a previous tenant, or neglect, be a problem-solver, a troubleshooter, and be ready to jump into action to turn your tax sale home into what you envisioned.
Be Prepared to Handle The Previous Owner
The previous owner may still live there and not want to leave. They may also have debt attached to the property that transfers to you. Follow the letter of the law when launching an eviction process if you decide that that’s how you want to handle the situation. If you are accepted as the purchaser, prepare yourself for bumpy interactions with the person whose home you just acquired.
Talk to Others Who Do Tax Sale Home Bidding
Especially if you are a beginner in tax sale home buying, find the experience and understanding of the process by discussing it with others involved in tax sale tenders and auctions. They can often help you identify warning signs and properties to approach cautiously. They may save you from bidding on the wrong property for your needs.
