Today I’m answering your questions about back taxes land for sale, and the topics I’m going to cover are:
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Buying Land at a Tax Sale
Today I’m answering your question about back taxes land for sale.
I’m Ted Thomas, and for the past 30 years, I’ve been involved in a small subset of the traditional real estate business.
The subset that I’ve been involved in is tax defaulted property, which is mostly like traditional real estate except with one big difference, the properties are all in default due to unpaid property tax.
Today’s lesson is about back taxes land for sale which requires a small amount of explanation.
The Legal Process for Delinquent Property Taxes
I’ll start by mentioning that there are over 3,000 individual counties that are all separate taxing jurisdictions. The legislature in each of the 50 states authorizes the county governments and municipalities to tax real estate.
The local government uses that tax revenue to pay the county employees and for dozens of other things, like hospitals, libraries, and road maintenance.
The county treasurer is authorized to levy and collect property taxes. If the taxes are uncollectible, the treasurer will produce a notice of default which begins the due process of law and advises the tax defaulted property owner that the government is taking action.
How County Auctions Work
If the taxes still remain unpaid, the county treasurer will seize the real estate and then post the property for auction on the county website and advertise it in the local newspaper.
The auction is a public auction, sometimes on the courthouse steps. Anyone can attend. If you plan to bid on back taxes land for sale, you need money.
The county does not want the property. In most instances to incentivize the bidders, the county treasurer will start the auction bidding at very close to the delinquent back taxes.
This means the starting bid could be as low as 10 cents or less on the dollar of the assessed value. It’s not unusual for the county treasurer to start the bidding at 60%, 70%, or 80% below the official tax assessed value.
Additionally, the treasurer will delete the mortgage or deed of trust loan.
Tax Deed Auction Rules Vary Per State
Different states have different auction rules. It’s the responsibility of the bidder to be aware of the rules.
Some states allow only residents of that state to bid at the auctions, while others allow anyone from anywhere to bid.
Generally, states allow a period of 1-3 years for redemption, meaning the owner who lost the property at auction could return and redeem by paying 100% of the winning bid plus a large penalty of 20% to 25%.
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What Type of Deed to Expect at a Tax Sale
After the auction, there may be a waiting period for the buyer to receive a deed of ownership.
The deed will have a statement within the document that declares no matter what the title that you have purchased a quitclaim deed. It will be printed within the narrative of the document.
The title of the document may be quitclaim deed, sheriff’s deed or treasurer’s deed or any number of other names.
However, in all instances that I have observed, there will be a statement revealing that the deed is quitclaim deed.
Clearing the Title on a Tax Deed Property
What is a quitclaim deed? I’m not an attorney, CPA, or real estate broker. However, from a layman’s standpoint, my understanding of a quitclaim deed is that the new buyer is 100% responsible for any defect of the property or any defect of the title.
Newcomers need to employ an expert like an attorney or a title officer to be aware of the legal consequences of quitclaim deeds.
A quiet title is a process requiring an attorney to do the work and a judge to sign off on it before the title is clear or marketable.
None of this is negative. It’s the process, and newcomers should understand that since you’re purchasing at bargain prices, the county will not have responsibility for the condition of the property or the title work to the property.
Things to Know Before Buying Land for Back Taxes
When you’re buying back taxes land for sale, don’t buy the land without a survey. Only inexperienced buyers work without a survey and a competent land broker. The surveyor will advise you on what you’re actually buying.
A boundary survey is very important. It will let you know if another property owner is encroaching on your property or if you’re encroaching on someone else’s property. Lenders will not loan without a land survey.
Purchasing Land at Tax Defaulted Property Auctions
From what I’ve seen, there’s less competition for back taxes land for sale at auctions. Most auction buyers are there to bid on houses.
My experience at auctions has shown that 20% to 25% of auction lists are land which is sold at discount prices.
Land requires you to investigate and be knowledgeable about getting water and power to the land. Other considerations are items like drainage and roads.
Is the land buildable for homes? What amenities does it have? Is it close to schools and shopping? What are your future plans for the land?
Reselling Tax Deed Property Fast
If you want to sell quickly, spend money on marketing and media, like newspaper ads. Use sites like Zillow, Trulia, the Multiple Listing System, Craigslist, and Facebook Marketplace. Put up signs on the property.
You must know the market. You must know your competition and what they are doing to fit into the marketplace and make a quick sale.
We hope you enjoyed Ted’s lesson, “Buying Back Taxes Land for Sale”
If you’d like to know more about tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
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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.