All Forum Posts by: David C.

Nothing to report yet.  Between work, family and what I'm looking for I haven't found the right place to be the first buy.  I'm limiting myself a lot, aiming for too high and wasted a lot of time in research but at least I'm learning a lot.  Fortunately I haven't wasted too much money in this holding pattern but every month that passes prices go up higher around here.

 Looks like I missed the auction.  I couldn't pull it up on auction.com.  It looks like a nice house from that picture.  How much did it go for?

I've followed a few of these auction.com sales and if they are that undervalued they never go for the minimum bid.  Most of the ones I've been interested in around that neighborhood end up auctioning off for about what they're worth I think.  So I doubt you would win an auction for a $125,000 house for $25,000.  (Tax value $125.)  I think some people put low starting bids to get more interest in the property.

Even though I personally prefer working with less debt if you have a solid deal there are people who will finance you through equity or loans.  There are people that have done these things no money down but thats too much risk for me, but see how other people have done it.  If you could really get it at 25k standard flipping would work.

Since it says cash only it just means they will not finance it.  You can still get your bank, credit union, hand money lender or rich uncle to finance it, they just have to be able to come to the table at closing and pay for it.

The auction site works a lot like ebay.  You register.  Select a property.  Review the documentation.  Do your own outside research.  (Never trust an 'estimate value' or 'tax appraised value.')  Some of them you can go visit with a realtor.  When bidding comes its like any online auction.

Supposedly depending on how the auction is set up an agent will call you to confirm you as a bidder.  I've been registered to bid on some higher end properties and nobody has ever contacted me.

I've never won anything through auction.com so I wouldn't be able to comment on that part.

For the time I was watching it closely in the area I didn't think there were a lot of deals on that site that met my pretty particular requirements so I haven't followed it in a while.

Let me know how the auction went and how much the property went for.

*Edit: Typo

@Account Closed

Its not on a state highway. Its northwest of Huntsville. Unfortunately it is too far away from where they are building the new houses on acreage around Huntsville too so that rules out selling it to a professor there or a prison warden.

@John Blackman

Thanks for the advice. I was thinking along those lines but its good to hear it from someone else.

I don't know of any way to find out what the properties went for. Calling up the constable or the lawyers doesn't work. Auction.com does an auction from a tent on the north side of the courthouse but I think you can also bid online for those too.

Great results! Very inspiring.

How long did it take you?

I have a lead on some rural land in East Texas but I'm not sure how I can increase increase its value to make it profitable.

It currently has an existing cabin and septic, but the cabin needs to be torn down so he is only selling it for lot value.

Cost to build in the area would run $65/ sq ft. I talked to someone in the area who told me that new builds would sell for $85/ sq ft but after reviewing comps most were 30 years old listed for $65/ sq ft and lingered on the market for 6 to 9 months.

The owner of the land is already going to have to take a bath because when he bought it the cabin was usable but it has been left to rot.

It is not close enough to any small town to sell to anyone except as a hunting cabin or small weekend farm and its not along a major state highway. Some of the neighbors run cattle but they are not interested in purchasing it.

Does anyone have an idea of how to increase this property's value? Has anyone been in a similar situation?

Thank you for the kind feedback. Here are my responses as I understand them. Please verify for yourself since I am new though.

@Tom Yung

<<TX is redeemable deed state. 25% for the first, additional 25% for the second year.>>
As I understand it the original owner can redeem it for 2 years if it was a homestead (even if it was not registered as a homestead, as long as they lived in it and treated it as such,) agricutlural, or mineral use. If they redeem it in the first year they must pay you how much you spent, plust 25%, and if they redeem it in the second year, how much you spent plus 50%.

If it is not a homestead, agriculture or mineral use it can only be redeemed for about 6 months (180 days) and you must be compensated costs plus 25%.

These requirements don't take a full year to vest so even if they redeem it one day after the tax sale they still have to pay 125%.

The law linked below also describes what costs can be included in calculating this amount. For example taxes, repairs or improvements required by the city would be included but optional upgrades would not be. So you wouldn't want to improve a rental property greater than 125% or 150% of the value you obtained it until the redemption period was up.

See http://www.statutes.legis.state.tx.us/Docs/TX/htm/TX.34.htm

<<Did you get any properties?>>
Unfortunately no. I was very selective about what I was interested in, and those few that fit my criteria were targeted by other bidders. Maybe next month!

I was most interested in two resales. One was appraised value was $100k, starting bid was $3k, my estimated value was $120k. Someone purchased it for $90. The funny thing was when it went for sale before it didn't meet the minimum bid of $50k.

Another property I was interested in was appraised at $100k, starting bid was $3k, my estimated value was $90k. Someone purchased it for $75k. When it went up for auction before it didn't meet the minimum bid of $35k.

I had my eye on four other properties, I would take them if the price was right but I wasn't particularly interested in them. I was not interested in most of the properties as many were vacant land in bad parts of town or dilapidated houses which didn't fit my profile.

@Waylon Themer
<<many properties are brought current prior to the sale, so it is worthwhile to call the courthouse the day of the sake to be sure the properties you are interested in will actually be auctioned off. >>

Yes. I would estimate about 85% of the houses up for auction in the "sale" were resolved beforehand. Most all of the "resales" were still available. Some of the bidders arrived expecting to bid on a property that was never available. I think a lot of people end up paying their taxes when they finally see the gun pointing at them. Also I suspect some bankruptcy attorney, RE investor, or other type of person hunts these people down before the sale to try to make a buck. I want to talk to someone who had their place foreclosed to see what the process is like on their end. I wouldn't want to pay for a title search on 10 properties to have 8 of them not even come up for auction.

@Sharon Tzib
<<What is the difference at a tax sale between a sale and a resale? >>

The tax "sale" is where a property is offered up for auction the first time. The minimum bid is the lesser of the amount of taxes owed or the appraised value of the property. If no bidder meets the minimum bid the property is deeded to the taxing district (typically Harris County.) In about half the properties for the sale auction, the minimum bid was not met.

The tax "resale" is where one of these properties that were offered up for sale before is auctioned again at a much lower starting bid (10% or less of its appraised value.) The property already has already been deeded to the county so the clock on the redemption period is already ticking. So if a property has a redemption period of 2 years, but has been on the county's books for 3 you can sell it free and clear the next day. (Which is why I think some people were more interested in these.) With resales you also must pay the taxes it has accumulated since the county has owned it; this amount is not included in the auction and you must contact the tax assessor after you get the property to pay off the accumulated taxes. I telephoned the lawyer who handled the foreclosure cases beforehand to determine the amount of taxes owed on the properties I was interested in.

<<Also, what are precincts? How do you know what they are?>>
The precincts are just administrative subdivisions of the county. There are voting precincts, constable precincts, and commisioner precincts, so it can get kind of confusing. Their boundaries are subject to change based on demographics. The foreclosed properties are auctioned by constable precints. Which precinct the property is in should be listed on any property auction list you obtain in your research (publicans.com, daily court review, etc.) There are some parts of town where there are a lot more foreclosures (Pcts 1 & 7) than others (Pcts 4 & 5.) Linked below is a map or you can also search for "Harris County Constable Precinct Map."
http://www.harriscountytx.gov/constables.aspx

<<The thing that's always stopped me from pursuing tax sales is the lien issue...I've also heard horror stories of liens being filed last minute against a property so the unaware tax lien buyer would be stuck paying the bill if the property owner didn't redeem and they hoped to get clean title.>>

Yes, that worried me too, which is why I focused on resales in this first attempt. Since the county already had them I wasn't worried about a last minute lien. But I think better deals were had by the people buying the "sales."

Most of the properties I researched did not have any non tax liens against them. I figured if they weren't paying their property tax they weren't paying their mortgage either, and the banks are probably quicker to foreclose than the county. (Like 5 years or so of deliquent taxes for many of these properties.) But also I targeted properties that didn't look like they had liens so maybe I have a selection bias.

<<Paying to have title run on "X" number of properties, only to show up and find out they've been sold before the auction, ...was something I couldn't reconcile with. >>

Yes, my wife and I did a lot of the legwork ourselves. You can find out everyone connected to the property by looking up the foreclosure records through the County _District_ Clerk. Then through the County Clerk's (not County District Clerk's) website I was able to pull up reference numbers for liens and records associated with those names. You can gain a lot of information through the summary and description. You can't see the actual document. My wife then went to the Clerk's office, (or an office branch) and they printed off any records I was interested in for $5 per page. The people at the Clay Road office were much more helpful than the people in the main office.

If anyone knows a better way to do a title search yourself please let me know.

I also contacted many title companies. Some were not willing to offer insurance on tax foreclosed obtained properties at all, some for 4 years, etc. Title company policies varied greatly. Fidelity National Title, Cypress Office, was great about helping me get the title search done and were willing to work with me to secure insurance on the propety as soon as the redemption period and other risks ended. I can't talk highly enough about what a great experience I had with them compared to some other title companies in the past. The documents they turned up were ones I had already obtained from the County Clerk but since I think they can look up a specific property address, and not the round about way I researched the liens, it made me feel much better. Since most of the properties for "sale" never went for auction I would wait until the week before to make sure it is not cancelled before getting a title search for them.

<<so these auctions are a necessary evil if you really want to get a decent property. >>

I don't know about that. There are a lot of inefficencies in the process but I think professionals are already taking advantage of them. Also there is not a big selection of the particular type of properties I was intersted in.

On a personal note I hope you will love Cypress. It is a beautiful area with great parks and trees and plenty of shopping, churches, dining, wine bars and fun things to do. Property prices are reasonable compared to other parts of the city, especially for what you are getting. People there seem pretty friendly and I hope you will enjoy it.

I talked to a realtor by the name of Arnie Abramson who was very helpful about answering some simple questions I had (website txtaxsales.com.) He also gave a good interview here: http://flipnerd.com/texas-tax-sales-arnie-abramson/ .

There seemed to be more interest in the houeses rather than vacant lots because you can lease out the houses until the redemption period is up but you would have a tougher time making use of vacant land.

Dmitry,

Thanks for the tips! I was sure to do that.

Deidra,

Its great to see someone else here too. I certainly have buy and hold in mind long term in my I have an emotional with taking on long term debt. Because of that I'm still trying to figure what I would feel comfortable with. I would certainly like to learn the ropes by helping someone else for a while before taking on a lot of rentals myself. In the meantime I've been searching for deals, trying to make a profitable deal on the buy side.

1.0 Introduction

Here is my small experience with a Harris County Tax Sale. Harris County is the county containing Houston, Texas. Since I could not find much about the actual process I figured others might find some benefit in this. I do not know much so please do not rely on this; verify as needed.

2.0 Preparation

The tax sales are published monthly like twenty or so days before the sale. They are physically posted on a bulletin board but also published in a paper called Daily Court Review. The lawyers that handle the foreclosures also post the property list on their websites. Publicans.com seems to be the lawyers that handle most of the cases and they have an easy to download list but there are a few other foreclosures that other lawyers handle which will not be on the publicans website.

I verified the locations, values, and rents of the properties I was interested in, visited them in person.

3.0 Pre-Auction
The auction is held once a month at 1110 Congress, Houston , Tx. Registration starts at 8:30 am and bidding starts at 10:00 promptly.

When you arrive there is a registration tent in the plaza adjacent to the building southwest of the building. There were four lines with signs for new bidders and "will call." The signs were not clear so the furthest left line the New Bidders line was long but the second to the left line for new bidders was short.

If you are wanting to bid on properties in different precincts being a trusted friend to bid for you and upon registration just instruct them he is registering "for benefit of" (f.b.o.) you. It is difficult to follow multiple precincts' auctions.

The auctions are divided by the constable precinct where the property is. There are four auctions going on inside the building and five outside the building under the awning along with an auction.com tent. There is a diagram of the auction location at the registration tent describing where each precinct will be auctioning at.

Behind each auctioneer is a sign stating his precinct. There is also a list of case numbers representing the properties up for auction. Many of these auctions were cancelled or delayed as was noted on that large list.

4.0 Auction
Bidding was madness.

The auctioneers seemed to be unprofessional (but I would not be experienced enough to properly judge.) They were constables who seemed to be doing this because it was part of being a constable but they were terrible auctioneers. They were not loud enough, barley raising their voice in such a noisy room. As a consequence the bidders crowded as close to the auctioneer as possible. People were shoving and pushing against each other in a most unpleasant way, butt-cheek to butt-cheek. It was crowded, hot, and sweaty. The people who got their early, near the front of the crowd, were in a better position. There were no chairs; everyone stood. After the first auctioneer had gotten too hoarse another auctioneer took over. It seemed she didn't know the proper rules for incrementing bids and as a consequence left money on the table. (But my knowledge of auctioning rules is only through experience, I've never read the procedures.)

The bidding goes by property sequentially by case number. The case number is listed on the property auction lists you should have acquired in your research. It also goes sequentially by auction number (the number in parenthesis next to the auction date on the listings.) The auctioneer has a list of case numbers representing the properties posted behind him, mentioned above. When you arrive check this updated list to ensure the properties you are interested in are still available and have not been reclaimed, cancelled, or postponed by bankruptcy. As the auction progresses an attendant will mark off the sold properties. The auction started with the resales before the sales. None of the resales were canceled but the majority of the sales were.

The auctioneer starts by calling the case number, property description, address, and hcad number, estimated value and minimum bid. He then solicits minimum bids. People bid by holding up numbers they received in registration. These numbers are recorded as the auction proceeds. The auctioneer increased in increments of $10k, $5k, $1k, $500, or $100 depending on the property unless somebody called a higher bid. Those who held up their placard on the minimum bid were incremented automatically but it didn't matter because if there were multiple bidders it always went higher. Gratefully the auctioneer wasn't a professional and didn't use filler words or egged on bidders. The auctioning would be concluded with the auctioneer saying, "Going once for $X. Going twice. Sold for $X."

After winning the bid the buyer must immediately proceed to a table near the auctioneer and pay. If immediate payment is not available the property will be offered to the runner up bidder. The winner must pay by cash or certified check (which I assumed was a cashiers check) made out to yourself which you would endorse in front of the cashiers. I was told any amount you pay over would be refunded by a check in the mail. If you win a property you also need to present a document stating you are current in your property taxes which you can obtain from a nearby building after paying the constables (or secure it beforehand) called a "Written Statement of Taxes."

The auctioning continues until all the properties are sold or struck off due to not meeting minimum bid.

The crowd dissolved quickly after the resales were over and dissipated during the sales as there were fewer properties which bidders were interested in.

5.0 Commentary
As I understand it the money received from the bidding goes to the taxing districts minus constable auctioning costs in proportion to taxes owed up to amount owed. Any amount over owed taxes must be remitted to the original property owners or heirs. That seems pretty fair.

There were several classes of investors: novices, people interested in a single property, flippers, knowledgable speculators, wholesellers, hobbyists, and professionals.

Talk to all the experienced people you can. The accumulated years of experience in the building is only dwarfed by the years of inexperience. There was so much knowledge there!

According to the people who seemed experienced the new bidders were bidding up the property prices to unsustainable levels.

Do your research before you get there. Some people were looking up properties they were bidding on on their cells as they were bidding! Also not all liens are released at a foreclosure sale. A title search should be conducted. You should check the court documents to ensure all local taxes were and taxing district liens were removed. It seemed that if it said "Harris County et al" in the case description that happened but it is easy to verify and view the documents on the county district court's website.

I'm pretty sure some bidders were bidding on a landlocked 5' ditch easement between two other properties. Good luck doing anything with that.

Know the back taxes due. Many novices were buying property were not aware that the resales were accumulating taxes every month the county held it. They ended up paying way over retail for many worthless lots after taking accumulated taxes into account.

People clearly had print outs and maps of the wrong property! Google maps was especially inaccurate with 0 Street Name Rd. addresses. All locations should be verified with the tax appraisal district's website.

Also many people had their max bids written next to the property addresses. Often the bidders were smashed right next to each other. If someone spiteful wanted to run the price up to the max that would be trivial. Keep your max bid in your head.

Also wear a money belt or keep your cashier checks in a folder or somewhere a pick pocket can not access. Keep your wallet secure. Even with all the constables around it would have been a thief's dream, especially if you are assuming some novices had brought thousands in cash. Bring cashiers checks in multiple amounts as very few people got the properties at the minimum bid.

It is not a place I would feel comfortable carrying a lot of cash since there are so many bums around.

I don't think you can concealed carry their either because it is a courthouse so civilians are particularly defenseless on their way walking to and from there to parking. There are a lot of constables there so I wasn't that worried about common city violence once at the courthouse. Gratefully there was none of the goofy metal detectors or security theater nonsense. It was an open plaza and a large open room with several exits.

Check the laws on redeemable period if you intend to resale. Check with your title company about how long until you can secure title insurance as it may vary from six months, two years, or four years.

Know the laws about right of redemption and repairs vs improvements. You don't want to dump money fixing up a place to have the former owner taking it from you with all the improvements.

Visually inspect the properties in person. Novices were paying close to retail for what would have been its price based on square footage but many of the properties were in a serious state if disrepair and nowhere near its book value. Think wiring ripped out, AC stolen, foundation crumbling, etc.

You will not get rich. You may get a property at a discount but you will not get it at single digit percentages. If a lot is appraised at $10k do you really think you will get it at its minimum bid of $1,000? There were teams of professionals with laptops and folders who were coordinated and knew what they were doing. Do you think you are going to best them?

HCAD appraisals are notoriously inaccurate. Verify value for yourself.

A lot of people were way overpaying for worthless properties.

7.0 Advice

• Arrive early.
• Have the money you bid.
• Use cashier's checks rather than cash.
• Check the city maps beforehand for utilities, road access, obvious easements, flood zones, and restrictions.
• Verify the location and value of the property
• Verify the property restrictions and liens
• Take the bus or carpool as parking is expensive.
• Don't expect to win a minimum bid on resale properties.
• Talk to people.
• Know your max bid up front.
• Don't get caught in the emotion.
• Watch out for your safety.

Edit: Included introduction to include where Harris County is.