California LA County Tax Auction Research

[Monica Abeyta]

Hi BP Forums!

I am currently researching the California LA County Tax Auction. Does anyone have experience with this? I have several questions and any info would be helpful. See below questions.

Any books or websites I should pick up or look into?

How does the auction work?

What is the competition like?

What due diligence should I do before bidding?

What happens if you win?

What about this redemption period of 1 year after winning? 

What happens if the original owner redeems a property in that 1 year? Do I get a return on my purchase at all? Do I get my money back at all?

What if someone still lives in the property?

How easy is it to evict someone from the property?

How easy is it to get title insurance after the year is up?

What if it's a multi family property? How are rents handled in that first year?

So many questions! Any info would be greatly appreciated!

Thanks BP!

[Kyle J.]

@Monica Abeyta  Tax deed auctions vary slightly county to county across California.  The laws are the same across the state, but the rules of the auctions and how they are conducted are what vary.  For example, some are in person whereas some are online.  Some require the winning bidder to pay in full immediately after the auction, and others give you time after the auction to make payment.  You get the idea.   

There's really no book you can read to cover all this.  The best thing you can read is EVERYTHING posted on the website of the county conducting the auction.  They typically post quite a bit of information, including things like: is preregistration of bidders required, how the auction works, when is payment expected if you win, what forms of payment are accepted, what liens are discharged by the tax sale and what liens are not discharged, when will you get title to the property, etc.

Expect there to be a lot of competition.  (There has been at every tax deed auction I've been to.)

As for due diligence, you're somewhat limited in what you can do since you usually won't have access to the property (so obviously you can't do an inspection).  However, if I'm going to bid on a property, a few of the things I do is research the neighborhood, drive by the house to look at the condition (and make sure there's still a house there - I've actually had some where it was now a vacant lot), check comps so I can get an idea of what my max bid should be, check rent rates in the area so I can get an idea of what I'd be able to rent the house out for, and check any code violations on the house since you'll still be responsible for those.

If you win, you have to pay for the property.  As I previously mentioned, some auctions require you to pay in full before you even leave the auction and others give you time after the sale to pay.  Some accept cash, some don't.  Almost all won't accept personal checks.  Almost all will accept cashier's checks.  Definitely know when and how payment is expected before bidding.

There is no redemption period after the auction, nor can the previous owner redeem the property in the year after you win the auction.  In California, the right of redemption generally ceases at the close of business on the last business day PRIOR to the sale. 

After the sale, a party may only challenge the validity of the sale (i.e. claim they weren't properly notified of the sale).  If they were successful in their challenge and the sale were to be rescinded, you'd get your money back plus interest.  However, you would not be reimbursed for other costs you may have incurred.  For example, if you already remodeled the property or paid for insurance on the property, you would not be reimbursed for those costs.

If someone lives in the property that's something you have to deal with.  You may have a new tenant who didn't do anything wrong and wants to continue living there, or it may be the previous owner who is going to try and remain in the property as long as possible without paying and you're going to have to go through the court process to remove that person.  That's a risk you take with buying these types of properties. 

If there is a tenant in the property, you can just introduce yourself as the new owner, ask them if they had a lease with the previous owner (ask to see it if they do), and decide what to do based on what you learn from your conversation with them.  Doesn't matter if it's a single family or multi family property.  The most important thing is to make sure they know not to send rent payments to the previous owner or property management company, and to start sending them to you.