How to prepare for a tax deed auction

How to prepare for a tax deed auction

If you have been reading my blog or following me on Facebook or Twitter for any amount of time, then you know that I love investing in tax delinquent real estate. When I first came to this country I couldn’t believe that some people would just let their property be seized for non-payment of property taxes (I still can’t believe it happens) but I was quick to take advantage of the investment opportunity that it offered me.

Every first year business student knows: buy low, sell high. Well, tax delinquent real estate is your chance to buy low. In other words, there is profit built into the purchase. In this post, I’d like to go over a few tips and tricks for getting the best deal at a tax deed auction (the kind of auction held in 50% of US counties, where the actual deed is given to the highest bidder):

  1. Get a list of all properties to be auctioned. The country generally makes a list of all properties to be auctions about 3 – 5 weeks ahead of time. They might publish it in a local paper, online, and can even send copies out to subscribers for a small fee. Get your hands on one (ideally a spreadsheet that can be easily edited).
  2. Filter down your list. Remove properties that owe too much or too little in taxes (reflecting on their market value) and remove properties that are located in undesirable areas.
  3. Perform a quick title search. Using the owner’s name and mailing address (as well as the address of the property) check the county recorder/clerk’s page for any lawsuits or documents related to the property. In particular, you are interested in IRS liens or mortgages, both of which disqualify the property from your list.
  4. Physically inspect the property. Either personally or using a representative make sure the structure is still standing and what kind of shape it is in. Do not trespass or try to force entry into a boarded-up house.
  5. Make a final list. Using the information you have gathered, prepare your final list. Decide which properties will be your priority, taking into account when each one will come up for auction (the county list is the auction order).
  6. Register and bid. Follow instructions to the letter, including registering in time and providing a down payment.

An insider tip… I have seen that the first few properties often go for very cheap simply because a lot of people are confused or aren’t ready to jump into the action yet. If one of these properties is on your list, don’t get caught off guard! I have also seen that, in counties with lots of properties for sale, many bidders have left by the end and the last few properties often go for just the price of back taxes.

Tax deed auctions can be a great way to make money if you know what you are looking for and do your due diligence beforehand.


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