Texas Tax Sales - What Happens When You Win?

Question

Hello.  My name is Jim and this is my first post on Bigger Pockets.  I'm a very minor (2 properties) real estate investor.  I've been a landlord since 2012 in the Austin area of Texas.

I've been looking into possibly participating in tax sales in my local county.  I am going to attend the next one simply to observe, get a feel for how high properties bid up, etc.  Now, I've done a lot of research, and I think I have a pretty good grasp on just about everything I can without actually jumping in and getting some experience.

But there is one topic that I can't seem to find much information about, and that is what exactly happens after I've won a bid.  Now, don't misunderstand.  I understand the technical aspect of what happens: I receive a constable's deed and have (perhaps not clear) title to the house.  What I mean is what happens in a practical sense.

Texas is a tax deed state, with a 2 year redemption period for homestead and 1 year for non-homestead.  I'm assuming 99% of properties for auction are claimed as homestead.  So my questions involve how (or whether) I will able to physically gain control of the property while the former owner still has a right of redemption pending.

First question: will the old owner still be living there when I win the auction?  Am I responsible for evicting him or will the government have already done that for me?

Secondly, if he is still there, I'm thinking that there is almost zero chance of my successfully evicting him while he still has a redemption option in addition to disputing the validity of my title at all.  On the other hand, that would mean he could live rent-free in my house for 2 years, and that doesn't seem very likely either.  Will I be able to evict him?

Arnie Abramson · Answer

Jim,

Here is our reasoning.  Odds are that if it is not redeemed you will have to hold it for 2 years even if it is not a homestead due to the title companies hanging their hats on the contestability issue.  If that is the case, I want cash flow income not cash flow outgo for that 2 year period.  If someone is living in it and it needs little or no repairs or rehab-so much the better.  You are entitled to immediate possession but you cannot evict before 20 days after the sale but you are entitled to rent immediately.

Arnie

Arnie Abramson · Answer

Many times the owner is in the house when it is sold at the auction.  You still have the right to evict him if you wish-after 20 days.  My question is why would you?  I have been buying houses at the Texas tax sales since 1992 and I love to buy them with the owner inside.  First of all, it probably needs less work than if it was vacant or had a renter.  Secondly, I tell the owner he has choices;  He can redeem, he can vacate or he can stay and pay me rent.  Many times we buy the house and get rent from the owner until he can redeem (usually he cannot).  As i say all the time in my classes that I teach on Texas tax sales-There are no short answers about tax sales in Texas.  So, this was just ja brief reply to give you a response based on my experience.

Arnie Abramson

Texas Tax Sales LLC

Cory Damon · Answer

Hey Account Closed is right on. Obviously you can take whatever approach you want, but I think its good practice to keep the owner in house if at all possible. Give them a killer rate on the rent - they'll stay and they'll take care of the place (it may already be a trashy place, but they won't purposefully trash it beyond the norm) - make it a win-win - you get a property and cash-flow, they get out from under this dark cloud and stay in their home.

A vacant property can actually be a bit more tricky than one that is occupied. Sure, you can go in right away and clean it up and rent it. But it can still be redeemed, and any work beyond basic maintenance will not be reimbursed. Now you've just handed over a nice cash-flowing property to the original owner (almost makes one wonder if people in-the-know do this on purpose).

By the way, the best education comes from jumping in... you got this Jim!

Carrie Hiner · Answer

No, the property will be vacant.  Good deals happen on the court house steps.  There will be a ton of competition - but someone has to win : ).  Let me know if you need sales or rent comps.

Joel Owens · Answer

Jim you might want to look up David Krulac on here. He has a book where he has been buying at the tax sale for decades and has made millions doing it.

The book is about 40 bucks but gives  example after example of deals he has completed with results.

Greg H. · Answer

Many if not most tax sales or even mortgage foreclosures will be occupied on the date of sale. Why would you think they wouldn't or who would have the authority to make them leave ?

Joel Owens · Answer

Another investor I know that invests in a different state checks with the owner of the property before buying the tax deed if they will sell their redemption rights for a certain fee. He gets an option ahead of time to buy the rights for a certain price.

I don't really know all the particulars so couldn't expand on it. I haven't talked to this investor for years.

There are attorneys in each state that focus on tax sales so taking one out to lunch or dinner might be time well spent on learning strategies and experience.

No legal advice given.

Nicholas Reece · Answer

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Texas Tax Sales - What Happens When You Win?

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