How to Buy Tax Deed Properties

••• Jupiterimages/Comstock/Getty Images

A tax deed sale is when the deed to a property is auctioned off in order to gain tax revenue that hasn't been paid by the property owner. The deal is basically that you pay the back taxes and county fees with your bid, in exchange for the deed to the property. This sounds simpler than it is, and you must understand the tax deed process fully before investing in it.

Contact your state's department of revenue office to see if your state law allows for tax deed auctions. Not all states allow tax deed auctions, so make sure your state is one that does.

Visit your county treasurer's website (or department of finance) and get a list of properties to be sold at the next auction taking place in your county.

Print a copy of the auction procedures and the list of available properties. Read over them and get familiarized with them.

Pick properties that have potential. The first thing you should look at is the minimum bid. Find something that's within your means and then look at the column that has "structure" in it. This indicates that there's a building of some kind on the property.

Look up each property's address. If there's a physical address with a street number, search for that address on Google Maps, Google Earth or Zillow.com. You can see for yourself by zooming in on the map to verify that there's a building on the property. If the address doesn't have a street number, it's probably an empty lot or field.

Research. You'll basically want to research the property for the following: neighborhood values, other liens or obligations and title eligibility. Again, use Google and Zillow to your advantage by looking at the street views of the surrounding neighborhood and conducting a physical inspection of the property online. Drive out to see the property and surrounding neighborhood yourself if the online assessment looks promising.

Research other liens or obligations; it's best to start with what your state law requires. Some county websites will give you a FAQ document, which will give you an idea of whether or not previous liens will remain on the property after you've purchased it. In California, for example, the sale at a tax deed auction conveys the title to the new owner free of all prior encumbrances, with the exception of a few (which are mentioned in the FAQ). If you can't access the information online, simply call the county treasurer or department of finance to find out what liens and obligations remain with the property and which ones are forgiven.

Have a local title company do a search on the property to see if it's insurable. There may be issues that you can't find on your own that would otherwise rule out a property from your list. Chances are if there has been a resident there within the last six months or so, the property is insurable, but don't rely on that alone. Make sure the property is usable before placing a bid on it.

Attend the auction. Never bid over what you can afford, or what might bring the price too high. You'll need the funds available as a cashier's check before you bid. In some counties the bidder is allowed to leave the premises for an hour or so to obtain a cashier's check from the bank, but again, this should be given in the FAQ or county procedures.

Fix, sell, keep or rent the house. The property you buy will likely need some repair, or at least you should be prepared to do some sort of repair or maintenance on it before selling. If you're not good at home repairs you can hire a contractor to fix it up.

Warnings

  • In some cases your winning bid may not be the final sale. Some states, such as California, allow the property owner a grace period in which to settle the tax debt owed on the property even though it has been sold at auction. Should the owner settle the debt during the grace period, the property ownership reverts back to him.

References

About the Author

This article was written by PocketSense staff. If you have any questions, please reach out to us on our contact us page.

Photo Credits

  • Jupiterimages/Comstock/Getty Images