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Updated 10 months ago on . Most recent reply

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Rita Merlo
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Tax Deed Auction Real Estate

Rita Merlo
Posted

Hello!

I have been looking into tax deed real estate particularly in California; I live in Los Angeles.

What has been people's experience with dealing with the dwellers/owners/renters of these tax deed properties? I'm hesitant due to the California laws that favor renters over landlords. 

Do most people wait 1 year for the redemption period before doing anything to the property?

Is your new property tax based on the assessed value of the home or the price you purchased it for at the auction?

I understand that it is advisable to do due diligence before bidding. What does your typical list of these things include?

Are there any particular strategies people use for bidding in these types of auctions?

Thank you all!!

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Bruce Lynn#1 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
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Bruce Lynn#1 Real Estate Agent Contributor
  • Real Estate Broker
  • Coppell, TX
Replied

One thing I would do is go talk to Lloyd Seigel at the LAREIC meeting they have every month near UCLA.  Have him match you up with someone locally that knows CA tax sales inside and out.   You might also want to read the book the 16% solution.   As you mention CA is a whole different animal.

As far as dealing with owners, very rare has it been for me to buy owner occupied property.   The ones I purchased actually redeemed and they were super nice properties.  All of them pretty easy to work with.  If you are buying occupied properties, best to know who's in it...Owner or renter.  If renter get a feel from them before you buy.  Go knock on the door.  Ask them if you can take a tour.  Ask if everything is working or if repairs are needed.  Ask them if they want to stay if you buy the property.  Since you don't have a copy of the lease, just tease them with, I understand your rent is X (made up #) and I won't raise that until your lease ends on X date.  You'll be wrong on rent and lease end, but that should prompt them to tell you what it is.

Not sure about CA, but I'm guessing you don't get reimbursed for renovation if seller redeems, so probably best to wait.  That is a good prompt to go look at your property code regarding tax foreclosures.  Know that law inside and out.  My guess is that it is not hard to read.  Read it 2 or 3 times and again every year.  You'll see or understand something different every time.

Due diligence....go to every single house you want to buy.  NEVER skip this step.  Online research is a way to eliminate properties, not add them to the short list.  My basics are:

1. Is there a mortgage
2. Any liens, bankruptcy, IRS, etc...do your title search.
3. Who lives there?
4. At the house...occupied or vacant?, electric meter? gas meter? foundation condition? roof condition? central heat/air?  Ask the neighbors for info.  If you can see the back of the house, that's a big bonus.  Is the yard full of cars and junk?  Pool green?  Is the back of the house even there (I've seen front look decent, back looks like bomb went off?)   Anything weird that code enforcement is going to be all over you to fix immediately?

Strategy....get your list, make a short list, drive the properties, know your ARV, know your max bid...go to 2-3 auctions before you ever bid on one. Network like crazy at the auctions. See where your max bid matched up to the winning bid. Were you in the ballpark? Would you have won or not even close? If you are surprised by a bid, talk to the winner, find out why they bid what they did. Revise your strategy as needed.

I'm thinking especially in CA, I would also spend a day in eviction court.  Just sit and listen and take it all in.  See what the judges are saying.  Make notes for winners and losers.  You want to have iron clad cases prepared if/when you have to be there.  Also study up on lease renewal restrictions and eviction costs in CA and LA or wherever you are buying.  I'm hearing stuff like you have to pay relocation costs based on # of years they have lived there or some expenses I think are absolutely crazy.

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