Tax Deed Properties

[Antonio Bodley]

Are all tax deed properties in bad condition? Are tax deed properties a bad choice for homebuyers looking to make a tax deed property as their residence?

[David Krulac]

Much of the above discussion concerns "redemption" and buying property "over the counter" or after passing through the Tax Sale. As my friend @Ned Carey said, Maryland is a Tax Lien state, as all many others.  Around half the states are Tax Lien States and around half are Tax Deeds States.  The laws, rules and regulations are different from state to state and even from county to county.  I've lost track of how many properties that I've bought at Tax Sale, but it is in the hundreds. In PA for example, which is a Tax Deed State, there is NO redemption.  Therefore if you talk about redemption at the Tax Sale, you're not including PA.  And also to get to the equivilant of the "over the counter" sale in PA, the properties must have already been through 2 tax sales with no purchaser.  In general, here at least, properties that make it to the third sale have been picked over TWICE by many buyers, sometimes hundred or thouisands of buyers and have no takers.  I had a conversation with one of the directors of Tax Sale, and she told me that the third sale list was "the dogs of the dogs".  I have written before on Bigger Pockets extensively about Tax Sales, so I won't repeat here all the wild, almost unbeliveable properties on the third picked over Tax Sale. On the other hand I have on occasion made purchases from the picked over list. One of my purchases was 5 adjoining vacant lots for $10 each. Honestly, it was a bunch of work and took time to get rid of that property. 

And another difference here, that is not the same in most other states, is that at the first Tax Sale, all the liens, mortgages, judgements etc, transfer to the Tax Sale buyer.  You are NOT buying the property "free and clear" as some people wrongly think. But, imho, this is the best sale to buy property.  You have to do a full title search, and most people, don't know how to do that, or don't want to pay the price of title searches, or don't even know that you need to do a title search.  At these sales the competition is much less, not the big crowds that are attracted to the "free and clear" sales.  One recent "free and clear" sale that I went to, there were only 76 properties for sale but there was a crowd of over 300 bidders.  I got one property but at least 200 bidders went home empty handed.  At another "free and clear" sale there were maybe 400 bidders for 150 properties, I bought 8 that day and was very pleased, some leaft with nothing.  At the first sale where liens transfer, I've bought a $300,000 house for $30,000 (there were other bidders) and a $160,000 vacation home for $6,500 (there were other bidders)  and I bought a 5 lot subdivision for $4,500 where surprisingly noby else bid even though there were 200 other bidders there.  The sales are unpredictable, the sale list 30 days before the sale is often 10 times larger than the day of sale list.  IOW, 90% of the properties on the sale list a month before the sale are not offered the day of the sale, most;y because the taxes were paid or other reasons.