Before a tax sale, there are many steps you can take to prepare and secure the property you want. This isn’t a typical real estate deal, so it doesn’t follow the usual process.
For any investor or bidder, tax sales offer a chance to grow their real estate portfolio and get a house for less than they would pay through traditional methods. Here’s how to secure a tax-delinquent home.
Research Local Tax Sales
Your local municipality holds tax sales that are not federal or provincial by design. Find out where to find local listings and what is involved in a local tax sale, such as whether it’s done by public tender or public auction.
Consider Neighboring Municipalities
If there is a very specific kind of tax delinquent property you are chasing – rural, inner-city, undeveloped land, or commercial property – you may want to also dig into tax sales in surrounding municipalities as well.
Secure Your Financing
You can’t secure a mortgage through a bank or credit union to buy a tax-delinquent property. To finance a tax sale house, consider alternative financing options, such as private lenders, using your savings or access to money, and more. Have your money ready in cash or certified check.
Restrain Some Budget for Updates
You may or may not want to renovate and update. Some repairs may be necessary to make a property livable. Be sure to set aside some of your budget for it.
In-Person Bidding or By Mail
If bidding in a tax sales public auction, you can make multiple bids and respond to others. If you submit a bid by mail, you can’t respond or make a second bid. You get a single bid, and that’s it. This will, of course, alter your approach to submission amounts.
Secure a Tax Delinquent Property By Auction
In an auction, your first bid should be fair but not your maximum. See what other interests are in the room before bidding more aggressively.
Secure a Tax Sale Home By Public Tender
First, when tendering by public tender, you want to ensure you fill in all the forms and documents correctly as directed by the municipality. You also want to ensure your bid is strong, aggressive, and towards the maximum of what you can bid. This is to provide you put your best offer forward.
Assess a Tax-Sale Property for Its Livability
Assess each tax sale listing. Tax-delinquent homes may require repairs. While you can’t inspect the inside, if you visit from the public road and get close, you may be able to assess what repairs or renovations are needed. This will help you disqualify properties that don’t fit.
Check for Liens, Such As Crown Interests
Complete a title search to check for outstanding liens. Liens become your responsibility after the purchase, and if you find liens, you may want to avoid bidding on that property. If you do, liens accrued over an extended period may exceed the price you paid on the tax-delinquent house.
Underbidding Won’t Secure You a Tax Sale Home
While properties are offered at a reduced price compared to their assessed value, you will need more to win. The competition drives up the bidding price fast, and there are more effective strategies to secure this type of home than underbidding.
Overbidding Will Cost You a Lot
Tax sale auctions can be fiercely competitive. Overbidding is common, especially if you don’t already have a bidding strategy and a budget. Don’t let your emotions get the best of you. Pull back if you feel yourself getting carried away. As a result, you can afford a tax-delinquent property relevant to your budget.
Be Ready to Close the Tax Sale
If you declare the winning bid, you are expected to close the sale immediately and have the funds readily accessible. If you cannot fulfill your bid, the municipality may take the property and give ownership to the next highest bidder.
Connect with a Lawyer Early
A lawyer experienced in tax delinquent properties and real estate can help you navigate complex situations, such as when there are liens on a tax sale home or current occupants who need to be evicted.
Learn from Every Experience
Learn from it even if you do not secure a tax-delinquent house at a specific tax sale. Tax sale properties can be complex. You gain knowledge and expertise you can apply to future tax sales as you bid and bid successfully.
