Are leftover tax deeds bad investments?

Question

The state has a ton of unsold tax sale properties that have an expired redemption period. Is it not worth trying to profit from these properties held by the state? Once you become the new tax deed owner, how soon will you be handed the keys to this tax deed property?

Michael Lee · Answer

Hello and welcome to this website!  It is different in every state and the counties.  It all depends on the extended redemption period of the previous owner.  I have learned quite of education on that but I never heard how long it would take to get the keys.  That can be found out by talking to County Clerk's secretary or someone at the county that deals with tax deed sales.  Just about every county has its own way.  Some of the properties that did not close in auction might be on an over-the-counter sale.  I learned a lot from two men that have been doing this for about 20 years.  Calling the county department that does this is where you get the rules.  Not to try to break-your-heart the last thing you want to do is keep the same keys for security reasons.  Do your research and make sure you know all about them including liens and foreclosure status.  Be honest and friendly with the secretary in the deed department that sales.  Depending where you can buy you might have to pay for a registration.  Some states do tax certificates and some do property tax deeds, and some do both.  You might want to go to a couple as a practice run and see how they do it.  You need to pick counties and dolls R maximums and do not let emotion get the best of you. Try to look at the properties before the auction to see what kind of shape they are in.  I am sorry for saying so much but I wanted you to see how much work is involved.  Oh yeah, I think you have to pay in cash because they typically do not accept any financing.  Best wishes!

John Underwood · Answer

These are all.properties that everyone at the regular auction passed on. yes you can find some OK stuff there once in a while. You need to do your research and look at the deed history and drive by the property and look at it. You may find something that everyone else missed. vacant land that has issues is much harder to do something with than a house that has issues. If the house is decent or repairable you can get it going as a rental even if there are issues with the deed.

Just remember there is a reason no one bid on it at auction find out what the reason is and see if your comfortable with the issues vs the amount of money it takes to purchase it and then get it ready to sell or rent.

Tony Marcelle · Answer

@Josh Carr Thanks for that info. Have you ever known for an investor to purchase leftover tax deeds using private funds?

Josh Carr · Answer

@Tony Marcelle- There are many properties in lots of different states that could be good and not sold at an auction.  It all depends on who shows up to the auction, what day of the month it is, and how deep the pockets are attending.  There might also be an auction you'd go to and even first hand at the auction they aren't worth the amount of the taxes.

It's very important to do your "due-diligence" and once you do you'll know if it's worth anything or not.  You always want to make sure you have a greater assessment than your investment.  Some states will still have auctions even though they have gone up for sale once already.  This is the same or considered as a sealed bid and once an offer has been made then there will be a time frame for other offers.  Even then the highest offer takes it.  You can find some good properties this way if you get to the listing directly or shortly  after the auction.

Texas has struck off properties, most of  IL is handled by a law firm as the Trustee.  CA does not sell anything "over-the-counter", but there are a couple of counties that will sell tax-defaulted properties up to 90 days after their auction.  AR properties are found with the commissioner of state lands and MO has the forfeited lands commission.  Every state has some variation of how it happens if it happens at all.  Over half the United States sell tax deeds and these will be properties of ownership if you are the highest or winning bidder.  Because of this you want to make sure you know what you're getting.  This can be done with a title search or a very extensive search with the recorder's office along with input from the Treasurer or Tax Collector.   If there is anything against a property then you will find it here and know what your offer is or if it is worth the asking price.  There are many ways to find properties after the auction that have value.  Some people have made bankruptcies or IRS liens their niche'.  Learn all you can about the process of the state you invest in and it will be worth it's weight in gold.

Michael Lee · Answer

Hello again!  That is why the homeowner will still be living there.  The homeowner does not know typically that the house will be sold at auction.  That is also why I recommend looking at the property before you buy.  The homeowner usually not do the maintenance work and that reduces the value of the property.  The sale may not be known by the homeowner (or tenet). A bunch of those properties are owned by people that own it are out of the town or state.  The homeowner might still be there because they are not vacated  until foreclosure is announced.  In the meantime they are staying there free.  I would use a legal authority to get rid of the owner/tenet.  One way to get money out of it is to treat it like a pre-foreclosure and offer a homeowner to leave for a dollar amount at a price that you determine.  That may be able to take the property than less of what you would have to pay at auction.

Best Wishes!

Tony Marcelle · Answer

@Michael Lee@John Underwood Thanks guys. I have a list of tax sale properties I purchased from the county. I have went by to see some of the homes in person. I can see why quite a few did not sell at auction because of the war zone like area. My state is a tax lien state, but those liens have become tax deeds as soon as the redemption period ended. I was looking at two options to get the deed. One was to contact the owner of the delinquent tax property to see if they would be willing to deed me the property instead of letting it go away at a tax auction. The other was to use what money I can afford to spend buying the tax deed from the state if they are decent enough to buy. Some I considered purchasing for myself to live in. The issue with that is the homes I liked are still occupied by the owners even though the property tax has not been paid within the redemption period.

Are leftover tax deeds bad investments?

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