Thinking about shopping the tax or sheriff sale real estate market, but wondering how to get started? Here are some tips for avoiding some major watch-outs and getting some good bargains.
Know the Sale Rules In Your Specific County: All counties operate slightly differently relative to tax and sheriff sales, so know what the rules of your county of interest are. They are likely conveniently posted on the internet, but if they are not, you will need to call or stop down to your Sheriff’s Office or Tax Claim Bureau to get get a copy. Some counties require you to register in advance of the sale date, so don’t wait until the last minute.
Attend a Sale Before You See a Property of Interest: If you are thinking about bidding on sale property as a means of acquiring real estate, start going to sheriff and tax sales now. You will obtain valuable real-life experience on how the sale is conducted in your area. You may have an opportunity to talk to other residents and investors who frequent the sales. I struck up a conversation with one of the lawyers bidding for the bank at one sheriff sale I attended, and got a better understanding of the process from the lawyer than I did from the sheriff’s office. Knowing the ropes and becoming a more informed buyer is a major key to success at the sales.
Only Bid on Property You’ve Researched and Seen in Person: Learn to research deeds, mortgages, liens and easements at your courthouse. Unless you want to pay for this service from a professional every time you are slightly interested in a property, learning to do the basics yourself will help you to differentiate problem properties from the good ones. Go to see each property planned for sale. You will find that many do not look anything like the photos at the assessment office: they may have burnt down, significantly degraded, or become trashed with debris. Do not rely on mapping services such as Google Map to show you what you can see with a physical walk by the property. Most properties that make it to the tax sale have some sort of problem, and it is up to you to find out what the problem is and whether you are interested in becoming the problem’s new owner.
Learn What to Expect but There Are Always Surprises: I thought I knew a little about buying at sales since I was a three times over veteran. I was cautious about title defects, property line problems, trashed trailers, houses and lots, and other common problems. Then I ran into (but did not bid on) a life tenant situation. If a buyer purchased that particular house, he would have a tenant for life who would remain in physical possession and pay no rent. I sure am glad I steered clear of that one!
Know the Difference Between the Various Types of Sales: Understand the types of tax sales that exist in your area. Every state and county can be different, depending on local laws. With some sales (Free and Clear or Judicial Sales), mortgages and liens and previous taxes owed are forgiven. In other sales, any liens or mortgages remain with the property after your purchase. Do not rashly buy a bargain-priced property only to find that the property is mortgaged for a large sum, and that the mortgage remains with the property.
If You Dislike Bidding, Check Out the Repository: In my area, properties that have not sold at the free and clear sale are put into the repository, and you can submit a bid to purchase them outright for a small figure. While most repository properties are mobile homes without land, some can be land. The land that ends up in the repository is usually a small parcel, sometimes with no access. It could be floodplain or perhaps have a burnt out building on it, left in a dangerous state. I found one listed that had only the three story chimney and a small section of house left remaining standing on a small lot with nearby neighbors. What a liability! Check the repository parcels out carefully.
With a lot of care and research, you might make a couple of decent finds over the years. I myself have made three good finds, and always am optimistic that there might be more out there. Happy Hunting!