If you are looking for a way to invest in real estate at a low cost, you might be interested in learning about tax deed sales. A tax deed sale is a type of auction where a property is sold by the government to recover the unpaid property taxes from the delinquent owner.
In this blog post, we will explain what a tax deed sale is, how it works, and what are the benefits and risks of buying a property through a tax deed sale.
What Is a Tax Deed Sale?
A tax deed sale is a legal process that allows the government to sell a property when the owner fails to pay the property taxes. Property taxes are assessed by the local government where the property is located and are used to fund various public services and infrastructure. When a property owner does not pay the property taxes for a certain period of time, usually one or two years, the government can acquire the property's deed or title and sell it to the highest bidder at an auction. The minimum bid is usually the amount of back taxes owed plus interest and penalties, as well as the costs associated with the sale.
How Does a Tax Deed Sale Work?
A tax deed sale follows a series of legal steps that vary depending on the local and state laws. Generally, these steps include:
Notifying the property owner of the delinquent taxes and giving them a chance to pay them before the sale.
Applying for the tax deed at the county office and posting a notice at the property and in public places.
Publishing a public notice of sale in newspapers or online platforms for a certain period of time before the auction date.
Holding the auction at a specified time and place, where anyone can bid on the property. The highest bidder wins the property and must pay the full amount within a short period of time, usually 48 to 72 hours.
Issuing a tax deed to the successful bidder, which transfers ownership of the property to them.
What Are the Benefits and Risks of Buying a Property Through a Tax Deed Sale?
Buying a property through a tax deed sale can be an attractive option for investors who want to acquire real estate at a low price. However, there are also some risks and challenges involved in this process. Some of the benefits and risks are:
You can buy a property for much less than its market value, sometimes as low as 10% or less.
You can resell or rent out the property for profit or use it for your own purposes.
You can benefit from any equity or appreciation that the property may have.
You may not be able to inspect or access the property before buying it, so you may not know its condition or quality.
You may have to deal with other liens or encumbrances on the property, such as mortgages, judgments, or easements, that may affect your ownership or title.
You may have to evict or relocate any occupants or tenants that may be living in the property.
You may have to pay for any repairs or maintenance that the property may need.
You may have to wait for a redemption period to expire before you can get full ownership of the property. A redemption period is a time frame during which the former owner can reclaim their property by paying off their taxes and fees.
A tax deed sale is a way to buy real estate at a low cost by bidding on properties that have unpaid taxes. However, it is not without risks and challenges, so you should do your research and due diligence before participating in one.
Keep it Foxy
Sales Manager & Founder