In this interview, Ted compares bank foreclosures and property tax deeds. Ted Thomas has been involved in the tax delinquent property business for over 30 years.
However, prior to that his trademarked name was Mr. Foreclosure, and he wrote a 457-page book on the subject. Today we’ll discuss the reasons why Ted switched from bank foreclosures to investing in tax defaulted real estate.
You may watch the video above, or if you prefer, read the transcript below.
The topics to be covered in “Bank Foreclosures vs. Property Tax Deed Foreclosures” are:
- About Real Estate Foreclosure Auctions
- A Better Way to Buy Houses at Auction
- Buying and Selling Properties Online
- Learn More About Cheap Real Estate Auctions
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About Real Estate Foreclosure Auctions
Economies go through cyclical patterns, and during downturns, bank foreclosures can be rampant. The process of foreclosure has been around for more than 2,000 years. People would put collateral up for a loan, and if they couldn’t repay the debt, the lender would seize the collateral.
For a home loan, the collateral is the house. When homeowners falls behind on payments, the bank will send notices of default as part of the due process that precedes bank foreclosures, until the defaulted home is ultimately seized and sold at a foreclosure auction.
At a foreclosure auction, the bidding starts at the amount of the mortgage. For example, if the home is valued at $200,000 and the mortgage is $190,000, the bidding will begin at $190,000. This is the reason why bank foreclosures can’t compete property tax deeds.
A Better Way to Buy Houses at Auction
Tax deed auctions are held by local counties. The properties were seized for unpaid property taxes.
At a tax deed auction, the bidding begins around the amount of the delinquent back property taxes, so the starting bid on a $200,000 house could be $20,000. Additionally, the mortgage is extinguished.
Why purchase bank foreclosures when at a tax deed auction, you can buy mortgage-free properties for 10 or 20 cents on the dollar? This is why Ted gave up on investing in bank foreclosures, and began purchasing tax defaulted real estate.
Buying and Selling Properties Online
Today tax deed properties are conveniently auctioned online. Property research can be done online, and reselling your tax deed properties can also be done online.
Sites like Craigslist, Facebook Marketplace, the MLS (Multiple Listing Service), Trulia, and Zillow enable you to sell real estate from your home no matter where you are in the world.
There are multiple strategies for selling real estate online to generate quick cash flow and create residual income, and Ted teaches how to successfully implement these strategies.
Learn More About Cheap Real Estate Auctions
If you want to learn more about tax deeds, view more of Ted’s free videos.
Ted is the authority on the subject of tax lien and tax deed investing and has been teaching students how to buy and sell bargain real estate for over 25 years.
Most people are aware of bank foreclosures, but few people know about property tax deed foreclosures.
At a bank foreclosure auction, the lender wants to recoup the amount of the mortgage, and that’s where the bidding begins. Mortgages are usually 80% or more of the property value, which leaves little left in profit margin for the buyer.
Read the Video Transcript:
Bank Owned Property Auctions Vs. Property Tax Deed Auctions
Randy: Thank you for joining us again today. I’m Randy, and of course I’m here with Ted Thomas. Ted, good to see you again. Always good to see you. It’s really cool to see what shirt you’re wearing for the day. Colorful. Your shirt’s almost as colorful as you are, kinda. Oh! It’s like a death head on the back.
Randy (cont’d): Well, that almost plays into what we’re going to be talking about here, Ted, because there are some hard times out there, obviously. Some folks are facing bank foreclosures on their house. It’s a bad reality, but on the other hand, in business and such, it can turn into an opportunity. Let’s talk a bit about that, about bank foreclosures and homes that are for sale. What can somebody do with that as a business?
Ted: I surprised you a little bit. In the United States, if you have a reputation for doing something, you can get a trademark from that. I actually have a trademark on the name Mr. Foreclosure. I own that name in the United States.
Randy: Do you really? Wow.
Ted: Yeah, because I came from the bank foreclosures business. Now stay with me. I’m just going to reach back here to my library, and I’m going to give you a surprise.
Randy: Mr. Foreclosure.
Ted: 30 years ago, I wrote that book.
Randy: Wow! How many pages is that book, Ted?
Ted: It’s 457 pages.
Randy: And no doubt, you still all have all this up here in the head, right? It’s something you practice often. Can I also assume, since you wrote that book, that you even made the process a little smarter, more efficient, more effective?
Ted: The process of foreclosure has been around since they started our calendar. In other words, more than 2,000 years. When someone lent money to a person and the person wasn’t able to pay it, the lender would create a mortgage, or in the United States, they call it a deed of trust. Foreclosure is nothing more than the lender taking their collateral back.
Ted (cont’d): So the banks, well, everybody says they’re mean, but you couldn’t do it without banks. The banks lend money. The challenge is when we have an industry that shuts down. When they collapse, as they do in a cycle economy like we live in, when that happens, a lot of people end up in foreclosure. It’s become a dirty word, and there’s nothing dirty about it.
Ted (cont’d): These people didn’t want to lose their property. Something happened in their life. They’re not bad. They just have some crisis, and their crisis is bigger than holding onto that house. Maybe their kid was in an accident and has to have extra surgery every year. People are going to give up their house and take care of the kid every time, I can tell you that.
Randy: Ted, so the lender lent the money. The person, for whatever reason, can’t pay the money back. Does that just mean the bank owns the property? All foreclosures are the same?
Ted: Well, the situation when the foreclosure started, pre-foreclosure taking place, the bank owns the property. The people haven’t made the payment, so the bank will give them many due process notices of default, tack it on the front door. Those people haven’t paid for the property, so the bank will tell them, “We’re going to auction this house off on the courthouse steps.” When they auction that house off, they’re not auctioning for pennies on the dollar. They’re adding to the start of that auction whatever the mortgage is.
Ted (cont’d): So if it’s a $200,000 house and the mortgage is $190,000, then that auction is going to start at $190,000. Would you want to pay $190,000 for a $200,000 house? I don’t think so. You don’t want that at all. That’s why I gave up on that business and said, “Wait a minute. I’m going to tax auctions. A $200,000 house starting at 10 cents on the dollar.” Which do you prefer?
Randy: Yeah, that makes a lot of sense, Ted, and I see why you’ve been doing this for so many years.
Ted: It’s just a different perception. If you go and watch television or you look across the internet, people don’t realize when they’re going to this auction, they’re teaching people to buy at the auction, that the bank wants their money back.
Ted (cont’d): Let’s take a $200,000 house. There’s $100,000 owed on it. If you got a $200,000 house for $100,000, that’s a pretty good deal. But if I go to the tax auction, it’s $200,000, and I get it for 10 cents on the dollar. It doesn’t take long to figure out that margin is a lot different.
Randy: I get the idea. It makes sense, but here’s what I don’t understand. Why would the bank that’s owed all this money, why wouldn’t they just go to the tax auction, pay off the tax, and get their property back?
Ted: Mostly because number one, the County and the United States government would not let them go to the auction and buy the properties. The banks are in the banking business, not in the auction business. You and I are in the business of buying properties at auction, not the bank. This is for the Joe Average Guy that lives in the community. When I started 30-years ago, everybody just did it in their own community.
Ted (cont’d): Now you can do it all over the United States because we have the internet. You could sit in Miami and buy in Seattle, or you could sit in L.A. and buy in Oklahoma City. When I started, you couldn’t do that except by traveling all the way in. Now you can do this whole thing online. It used to be that I’d buy properties when I lived in Florida, and I had to travel all the way to Oklahoma City or Dallas or Houston or whatever.
Randy: So your expenses of doing your business have just been reduced big time, because just like you said, there’s no travel expense. That time you spent traveling, you could be investigating other properties to perhaps invest in.
Ted: Well, here’s an even better thing that’s happened. You could sell it online, too. You could use Craigslist, the Multimple Listing Service system, Trulia, Zillow. We teach people six or eight different ways to sell online. What about Facebook Marketplace? At all of those places you could sell property online sitting on your rusty dusty. Wouldn’t that be nice?
Randy: Yeah, it’s very nice. It sounds appealing the more you talk about it. Hey, this may be a dumb question, but I know you call these Tax Deed Auctions. Is there such a thing as a foreclosure property auction, or is that the same thing?
Ted: That’s really a dumb question. No, I’m just joking with you. Seriously, there are two different auctions, and people constantly confuse them. So I’m glad you brought that up. Here’s the deal. Most people have heard about foreclosure because they’re terrified if they get a notice from the bank saying, “Look, if you don’t pay, we’re going to take your property away.” You’re going to get a letter from the bank. That’s a foreclosure.
Ted (cont’d): But locally, people don’t realize that in every county in the United States, people default on their property taxes. If you default on your taxes, they’re going to send you two or three notices, and then they’re not going to make a lot of noise. They’re just going to confiscate your property and come and kick you out. That’s happening in every county.
Ted (cont’d): When the local government, the county, when they foreclose, same word, and they take the property, they’re taking it at back taxes and all they want to do is sell it to get the back taxes. You see, the back taxes is what pays the school teachers, the county employees, the firefighters and all of the police departments. So they have to have taxes.
Ted (cont’d): The government locally doesn’t want more property. They already own all the parks, the roads, the county buildings. They don’t want any properties so they sell those properties for 10 cents on the dollar. Here’s your choice. Go to a bank auction and pay off the mortgage, thousands and thousands of dollars, or go to a tax-defaulted auction and buy them for pennies on the dollar.
Randy: So you cannot be Mr. Foreclosure anymore. Perhaps it’s time to trademark a new name, Ted. Mr. Tax Auction or Mr. Tax Authority.
Ted: Well, actually, I’ve now got a different title. It’s Ted Thomas, and most people call me the Tax Lien Authority and Tax Deed Authority.
Randy: That’s good. Just make sure to get that trademarked before somebody else gets it, because obviously you’ve earned it. You’ve been doing it a long time. We know it.
Be sure to get your Free Gift from Ted today.
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.