Texas property tax sales, the good , the bad , the ugly

[John Harrell]

So you decided to get into the tax sale business . You get the tax sale list study the properties and decide which ones you want to bid on. You have listened to all the guru's talk about how easy and profitable it is. You even have set a max price for each property you will bid on . You are ready. So far so good. The first Tuesday of the month arrives let the bidding start. The first couple you bid on goes past your budget but the third one is a house on a lot in town that has been abandoned for 3 years . The owner died 8 years ago so there is no homestead exemption on the property as verified by the appraisal district . Congratulations you have the winning bid. You give the county your cashiers check and wait for your sheriff's deed in the meantime you go inspect this Jewel you have bought . Still good. When you open the door the bad shows up. The house was home to hoarders. It is even worse than the TV show. Dead animals, some are mummified. The trash will fill 2 -40 ft dumpsters. You need to clean it out before you can begin to estimate repair cost. And remember the redemption period for non homestead property is 6 months which means only repairs to prevent further damage to the home is allowed. It also means an heir can show up during that time pay you the amount you have spent on the house plus 25% interest and get the house. Not a bad deal very seldom happens though. Now the ugly. The 6 months expire and you own the house. You have a budget to repair the house to flip or rent.  Off you go to a lender to get the money to remodel the house with your free and clear title as collateral. The lender refuses to loan any money on the house for at least 2 years because no title company will insure the property  even though Texas property tax code,property code and probate code all basically agree regarding  ownership and redemption of the property.  You can't even sell the property because no buyer can get a title for 2 years. You can't repair ,no money the house is not livable so you can not rent it out. Property taxes have to be paid and the builders risk insurance has run out and will not renew until remodeling work is ready to start  which can't be started for at least 18 months. Any damages to the house during that time is out of your pocket, it could be completely destroyed. You might find a investor who might buy you out but unlikely. So you end up trying to hang on until you can get a loan and praying the house is still standing when you do. all because some guru said hoe easy it was to get rich at tax sales. Moral of the story .Don't buy tax sale property unless you have enough cash to cover all cost for 2 years. It can a profitable business but only if you are financially prepared.