Tax upset sale

[Rosalyn Reidt]

Wondering if anyone has made a deal before a house goes to a tax upset sale or auction. What snags did you run into?

[Michael T.]

Hi Rosalyn,

I'm in Erie, PA and am somewhat familiar with the tax sale system in this state. Be careful with the upset sale, as my understanding is that it wipes out back taxes, but all liens and encumbrances transfer with the property. If you're very interested in the property, you probably want to spend the money to have at least a preliminary title search done, so you can know what you're getting into. The last thing you want is to pay 10K for a vacant 50K duplex and learn that it's subject to a 300K lien.

If you feel comfortable waiting, the judicial tax sale in December may be a better bet, as you get the deed free and clear -- assuming all lienholders were notified in advance of the sale. Of course, the only properties that make it to judicial sale are the ones that didn't sell at the upset sale. So if you wait, you could miss out. And don't forget, if somebody screws up and misses notifying a lienholder, then that lien won't be wiped out.