How to Buy Real Estate With Delinquent Taxes

The two ways to buy real estate with delinquent taxes are tax certificate sales and tax sales. Tax certificates or tax lien certificates, and tax sales are held in the county of the property with the delinquent tax. At the county tax sale and tax certificate sale, the property is auctioned to the highest bidder. Investing in real estate with delinquent taxes can provide lucrative returns, if properly executed.

Buying Real Estate With Delinquent Taxes

Research the property of interest. Find out if the property is being sold in a tax certificate sale or a tax sale. In a tax sale, the property is sold outright, with the deed being transferred to the highest bidder. In a tax certificate sale, the property is still occupied by the homeowner. Each state has its own redemption period. This is the time frame the homeowner has to pay the delinquent property tax. If the homeowner doesn't pay the delinquent taxes before the redemption period ends, you may begin foreclosure proceedings to acquire the property.

Research the county policies. Find out the date of the tax sale and tax certificate sale. Most counties have a tax sale once a year, and the same applies for the tax certificate sale. Find out the bidding rules of the auction. Call the county clerk and ask information about the property such as estimated value and square footage.

Visit the property. Make sure you know exactly what you're getting for your money. Most likely the home will still be occupied, but taking a look at the outside of the property should give you a good idea about what you're bidding on. Observe the neighborhood. Take note of how the other real estate looks. Research property values in the area.

Calculate the price that you're willing to bid for the property. At most county tax sales you must put as much as 25 percent down once you win the bid. The remaining portion must be paid in cash, or you must have financing in place within three to five business days. If you need financing, you should absolutely have it in place before you bid on a property at a tax sale. If you're bidding on a property at a tax certificate sale, you must have all your financing in place. Most tax certificate sales require much less cash and outside financing, than a tax sale.

Warnings

  • If you choose to purchase a tax lien certificate, conduct proper research on title and bankruptcy standing. Your lien may become worthless if the IRS or other creditors have a higher position lien than you.

References

About the Author

Christopher Carter loves writing business, health and sports articles. He enjoys finding ways to communicate important information in a meaningful way to others. Carter earned his Bachelor of Science in accounting from Eastern Illinois University.