How To Buy Tax Deed Properties A Step-by-step Guide – Tax Deed Sales

October 31, 2010

When someone doesn’t pay their property taxes, counties can auction the deed to the home. They do this so that they don’t incur a loss when people fail to pay property taxes. It’s by far the cheapest way to invest in real estate.

Depending on the state in which you work, the county is only trying to collect on the amount of taxes owed, which can sometimes be as shameful as $3,000. This presents a huge opportunity for cash investors and people with a lot of patience (since most counties only auction once each year).

With that in mind, here is a step-by-step guide on how to win advantage of this amazing opportunity. First I’ll give you the short version, followed by the long version. Each step will be described in detail, so don’t worry if the short version doesn’t execute sense.

Short version:

  1. Pick an area or county that you’d like to invest in (must be a tax-deed state).
  2. Visit that county treasurer’s Web site, or the finance department’s Web site and obtain a list of properties to be sold at the next tax-deed auction.
  3. Pick properties from the list that have potential.
  4. Research each property.
  5. Attend the auction & bid/buy.
  6. Fix, sell, rent or hold the house for yourself.

Long version:

Step 1:

In choosing an area, you first need to pick a state that’s a tax-deed area. Here is a list of tax-deed states:

Alaska

Arkansas

California

Delaware

Georgia

Hawaii

Idaho

Kansas

Maine

Minnesota

Nevada

New Mexico

New York

Ohio

Oklahoma

Oregon

Pennsylvania

Texas

Utah

Virginia

Washington

Wisconsin

Step 2:

Visit the county treasurer’s website (or department of finance) and get a list of properties to be sold at the next auction. Here are some example websites that will give you information and links to either purchase or download their list of properties (I’ve included an example list if you’re unable to access these):

Sacramento, CA (free): http://www.finance.saccounty.net/Tax/TaxSale.asp

Los Angeles, CA: http://ttc.lacounty.gov/Proptax/auction_faq.htm

Alameda, CA: http://www.acgov.org/treasurer/land.htm

Albany, NY: http://albanycounty.com/auction/

El Paso, TX: http://trs.elpasoco.com/Frequently_Asked_Questions.htm

Lane, OR: http://www.co.lane.or.us/MS_Finance_Property/Purchase_Info.htm

Again, these are just a few examples. There are hundreds of counties available for the taking.

If you’re thinking of some place in particular, simply go to Google.com and type in “such & such county tax deed auction” and gaze for the official county website. Don’t go to anything with a “.com” attached to it or you’ll likely get sucked into buying some expensive package that gives the same information I’m giving you (all of which can be found online for free if you look long enough). While it’s valid to avoid most of the dot-com sites, some counties (especially the larger ones) do use a dot-com address instead of a dot “.gov”. El Paso, for example.

Your main objective in visiting the county website is to get a list of:

  • properties
  • auction procedures

Read over the procedures and get familiarized with them. Each county is a little different. Once you’ve obtained both, you’re ready to move on.

Step 3:

Picking properties that have potential all depends on what information the counties give you in their list. The first thing you should study at is the minimum bid. Find something that’s within your means and then peek at the column that has “structure” in it. This indicates that there’s a building of some kind on the property.

Then look at the address. If there’s a physical address with a street number, search for that address on Google maps or www.zillow.com. You can then see for yourself by zooming in or looking on Zillow to verify that there’s a building on the property.

If the address doesn’t have a street number, it’s an empty lot or field; in other words it’s useless.

By now you’ve probably narrowed down your list to 2 or 3 properties – which is OK – remember that this is only 1 county. If you spend a few hours each week and pick five or six counties, you’re looking at 12 decent leads on potentially cheap homes.

Be persistent in your research and don’t just focus on the county you live in. If you only focus on the county you live in you’re setting yourself up for failure.

Step 4:

Research. Boring and tiring,, yes, but it’s in your best interest to shroud all your bases, and it will take less time as you keep getting more experience.

You’ll basically want to research the property for the following:

  • Neighborhood values
  • Other liens or obligations
  • Title eligibility

For neighborhood values, the quickest diagram is to go to www.zillow.com and type in the address. You can zoom in and contemplate at estimated home values based on various sales data available. Keep in mind that some data is estimated and some actual. The estimates may not be completely upright or reflect the good stamp of a given home.

You should also select a bird’s eye view of the property on Google Maps, and use the “Street View” feature to see an true 3-D image of the property from the street. A physical inspection of the property is highly recommended.

To research other liens or obligations, it’s best to start with what your state law requires. Some counties will give you a FAQ document. This can give you an idea of whether or not previous liens will remain on the property. 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.

After that you should go to either the County Court or the Recorder’s office to see if there are any special assessments or liens that won’t fall off the property as specified in the FAQ or information sheet. Another option is to have a local title company do a search on the property to study 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 6 months or so, it’s a safe bet, but don’t rely on that alone.

Now you have all the tools needed to inaugurate investing in tax deeds

Step 5:

Attend the auction & bid/buy. Each auction differs a little, so it’s best if you simply attend to inspect how the process works. The FAQ document should tell you everything you need to know before going in for that particular county. The most notable thing to remember is that you should never bid over what you can afford, or what might bring the price too high. Also remember that you’ll need the funds available as a cashier’s check shortly after you win. 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.

Step 6:

Fix, sell, rent, or keep the house for yourself. The property you buy will likely need some repair before selling. If you’re not estimable at home repairs you can hire a contractor to fix it up.

Good luck!

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