Buying Tax Sale Properties Rules

[John Fitch]

Looking into Tax Sale Properties but are a little confused on the rules. Some Counties state that the ex owners have a 1-2 year redemption period after the sale. What exactly does that mean when it comes to using the property for renting and making improvements? Do you just have to hold on to the property untouched until the redemption period is over? Does anyone have any personal experience with this?

[Bruce Lynn]

@John Fitch ..... In Texas the normal redemption rule is 180 days for non-homesteaded properties, and 2 years for homesteaded properties and agriculture properties.  That typically will mean you don't want to do improvements during that time frame in case the owner redeems.  According to the property code, Section 34.21 you are only allowed reimbursement for expenses "for maintaining, preserving, and safekeeping the property" which would include insurance, legally-required repairs, payment of municipal liens imposed for health or safety reasons, HOA dues, and utility impact or standby fees.

So you may want to just clean up and rent by the month "as-is" until the redemption period is finished.

You can sell before the redemption period is finished, but likely not with title insurance.  So that probably means only to a cash buyer who understands redemption issues / risks.   In reality it probably means in any case you will get to hold the property for 2 years before you want to make improvements and can sell it.  Even with the 180 day rule, you may not be able to get title insurance for two years.

If you can find the old owner, you might be able to buy their redemption rights, but I think this is probably a rare situation.  #1 you might not be able to find them.  #2 they might not want sell their redemption rights.

Very few people probably redeem, but with that being said, I am in the process of having a property redeemed right now.  Not sure it will actually happen, but the former owner has told me he wants to redeem.   So it can happen.

There could be a potential exception to all this and that is with struck off properties.  If the sale doesn't happen at the first auction, some counties may "strike off" the property to one of the taxing entities.  Some of these wait for the 2 years, before they offer it up for sale again.  Then they would likely have no redemption period at that point.   These might be referred to resales.  Every county seems to handle these differently.

Some auctions warn you about the redemption period, some don't, but you better understand this fully before purchasing and rehabbing and reselling.  I'd start by reading the property code with regards to tax sales.