Tax deed sales - how much (on average) to win the bid?

Question

Hello all! As someone who has always been interested but never able to participate in an auction I am wondering what properties usually end up going for at these auctions (deeds not liens)? People on reddit and YouTube love talking about how they bought property for 10 cents on the dollar but don't talk about how often that happens or how much they end up getting for an ROI. I'ld be willing to bet the 10 cents on the dollar thing is pretty rare or that their actual ROI isn't very good.

I am hoping to get a better idea of what the average percentage of fair market value I can reasonable expect to pay to win a property might be. An average percentage of repair costs to get the house up to fair market value / or sold would also be good.

Thank you for taking the time to read my post, and thank you again for any wisdom or experience you can pass on!

Ed Tamayo · Answer

I have been doing tax sales for over eight years and, yes, I have bought land on 10 cents on the dollar but there is no way that those times will be back. The number of people on the auctions has multiplied and there is much more competition nowadays.

Bruce Lynn · Answer

@Jay Hinrichs   We're almost 100% in person in Texas still.  Online is authorized, but has not caught on yet.  A few counties have tried.  I think maybe 3-4 counties have tried online out of 254 counties.   I talk to a lot of people at auctions and seems like the general consensus from whoever the authorities are at the auctions like appraisal district or tax collectors is that they're not thrilled with online.  They seem to think prices might be higher, but headaches will be greater for them.   We probably have enough problems with local bidders not knowing what they're buying and they don't want to complicate it with people from other states or other countries bidding on properties they know nothing about.  Not to say everyone is naive, but as you probably well know, it is not as easy as perhaps it looks.  Name another country and think about lawn mowing liens or demolition liens, or partial ownership....things most people have never heard of or know how to resolve.

There are a mix of properties that go to sale.  Plenty of junk, but some gems mixed in.   I would say very few get picked off before the sale....that's work...but there are tax lien lenders here who give people hope, so often delays the inevitable for 2-3 years if there is equity.  They're the ones who end up picking off the properties before sale.   In many cases the sale list only comes out 15-20 days before the sale, so you have to be very very good and fast to make it happen before the sale.   Possible, but you just cut out about 95% of investors.

Bruce Lynn · Answer

@Jake Crouch   at the auctions around me it is rare 10% of the value.   Every auction is different and each property is different.

I'd pull the list for the next auction near you, study it.  Come up with values you think things are worth.  Then go to the auction and watch....normally I say do this 2-3 times.

Learn the rules, see the bids, talk to people.  Ask why they bought, what their exit strategy is, what they think it is worth, etc.  Compare to your notes.

You have to think though, if they were all sold for 10%, everyone would be there.....simple, but not easy.

Greg Purvis · Answer

You can view last years results for some/most WA counties, and finding previous years wouldn't take too much digging either. As others suggest, 75-90% of anything initially "interesting" typically gets paid off on the last day before auction. Most of the properties that do make it to auction are marginal at best, for WA counties maybe 1-3 on average with any kind of structure, and a handful of others. The vast majority have no to very little real-life use/value, other than niche/"recreational"/neighbors/holding/etc

With a little experience you may be able to pretty well guess which of the initially promising parcels might actually make it to auction - they will have a complicated title report/history, signs of complex liens or county issues, or owners who are truly hard or impossible to track down.

Bid for assets has developed a nice little "scam" - for lack of a better term- where they require the deposit (and charge their ~$35 fee) well in advance of the last day owners have to pay off back taxes. Inexperienced bidders therefore get their hopes up researching properties that aren't actually going to be sold - and in the competitive auction spirit, wanting to not go home empty handed... they end up bidding up the prices on whatever leftover scraps do make it through to auction.

Jake Crouch · Answer

@Bruce Lynn I absolutely agree with the idea that "If they were all 10 cents on the dollar everyone would be doing it." Your suggested plan of observation was what I had in mind, though my target county does their auction over the internet. I figure I can register, provide the deposit, and observe how the properties that caught my eye end up being handled.

The biggest issue I see with this is that I think I would really benefit from a mentor who is familiar with the specific area I am looking in, but because all of the counties in my state (or at least all of the counties I have looked at) do their auctions online, it is exceedingly difficult to network and make friends who are willing to share their experience.

That said, I plan to keep at it. Persistence is 90% of any battle in my humble opinion.

Thank you for the reply!

(edited to tag Mr. Lynn)

Tax deed sales - how much (on average) to win the bid?

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