You can make big profits if you’re buying tax deeds in California, and you know the rules and do your homework.
The topics I’m going to cover in this article are:
- Buying Tax Delinquent Properties in California
- California Tax Deeds
- Transferring California Tax Deeds
- Opening Bids on California Tax Deed Properties
- Fees and Premiums on Tax Sale Properties in California
- California Tax Deed Auctions
- Know the Rules Before Buying Tax Deed Property
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Buying Tax Delinquent Properties in California
The SF Gate is the website for the San Francisco Chronicle newspaper. It has a short article about buying tax deeds in California titled “How to Buy Tax Lien Property in California”
“Buying tax delinquent property in California is a straightforward process. California does not create tax lien certificates. Instead, it issues tax deeds on properties with taxes delinquent for five or more years, or if the owner has not enrolled in the county’s Five Year Payment Plan. The annual property tax deed auctions are very well attended and provide revenue for California’s counties,” writes Karen Rogers.
The auctions are open to the public. The auction is properly called a tax-defaulted property auction. The homes sold are called tax-defaulted property.
When a homeowner does not pay his property taxes, that county holds a tax-defaulted property auction. This is your chance to invest and make big profits. The Golden State has laws that allow tax-defaulted property auctions. But every county has its own set of rules based on state law. You have to know these rules to be successful.
If you want to own property, then California is an excellent place to invest.
UPDATE: A big change in the rules now makes you able to pick up properties even cheaper at California tax sales! Watch this video for more information:
California Tax Deeds
California sells tax deeds. The highly respected legal information website Nolo says once a property is sold in a tax-defaulted property auction, the buyer owns it. The article “Getting Your Home Back After a Property Tax Sale in California” explains this to homeowners.
If you lose your home to a property tax sale in California, you generally can’t get it back, except in certain limited circumstances,” and “Generally, when taxes remain unpaid, the taxing authority will eventually sell the lien (and if you don’t pay the past-due amount to the lien purchaser, that party can foreclose or use some other method to get title to the home), or sell the property itself in a tax sale.” the article says.
Transferring California Tax Deeds
Once you pay for your winning bid, the county has to do the paperwork to transfer the deed to your name. Each county has different rules and different lengths of time for this.
“The winning bidder may take possession of a property after the Tax Deed to the Purchaser has been recorded, which is between 60 and 70 calendar days after the date of the tax sale,” says the LA County tax information website.
Merced County takes “approximately three to six weeks after the sale.”
You need to know the rules for each county. Until the property deed is recorded in your name, you can’t do anything with the property. Once you get the deed, you can use the property yourself, sell it or rent it.
My website has videos that tell you how to sell property you buy at a tax-defaulted property auction at little to no cost. I also tell you how to build a network of property buyers.
Opening Bids on California Tax Deed Properties
The opening bid is set by state law. It is the amount of past-due property taxes, plus premiums added by the county. It is going to be well below the fair market value of the house.
Santa Clarita, a city in Los Angeles County, held a tax-defaulted property auction for several properties in 2014. One of the listed properties was 20714 Dot St. The past-due taxes were $35.03. At the time of this writing, the real estate information website Zillow says the property is worth $369,400.
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Fees and Premiums on Tax Sale Properties in California
The premiums added by the county can also vary. Sonoma County has a detailed explanation for these added charges for that county. You need to know the additional amount added in other counties for those auctions.
In addition to this, you have to pay the recording fees to get the deed in your name. Santa Clara County lists the fees collected there on the county website. Other counties have different fees.
One fee that is collected in each county is the Transfer Tax. That is 55 cents per $500 of property. If the property sells for $12,000 and $10,000 of that is for the property, then the fee will be $11. The Transfer Tax is not paid on the premiums added by the county.
So how much are the taxes? That depends on the county’s tax rate and the value of the property.
California Tax Deed Auctions
By the time tax deeds in California are offered at auction, the property taxes are at least three years past due.
“Property becomes tax-defaulted land if property taxes remain unpaid at 12:01 a.m. on July 1st. Property that is tax-defaulted after five years (or three years in the case of the property also subject to a nuisance abatement lien) becomes subject to the county tax collector’s power to sell that property in order to satisfy the defaulted property taxes. The county tax collector must attempt to sell the property within four years of becoming subject to sale,” says the California State Controller. This website also has links to every California County’s tax collector or treasurer.
The minimum bid for any property sold in a California tax-defaulted property auction is listed in the advertising for the auction.
The county is only interested in collecting the past-due taxes plus the interest, penalties, and fees added according to state law.
Know the Rules Before Buying Tax Deed Property
You have to do your homework when you’re buying tax deeds in California. You have to know what you are buying before you commit to buying property in the auction. You need to know the auction rules
Sacramento County has a long list of frequently asked questions (FAQs) that discuss many things you need to know including:
• Other liens. In general, a tax-defaulted property auction sets aside other liens on the property. A mortgage is eliminated. There are rare cases where another lien is not set aside by the auction.
• Your rights to the property. What can you do with it? What is the zoning on the property? When can you take possession? What if the house is occupied when you get the deed?
• How to register for the auction. This also varies by county. Some counties require a deposit. If you buy something, the deposit is used toward your purchase. If you don’t buy anything, you get a refund.
The more you know about the property, the better.
I can teach you everything you need to know about making big profits in tax defaulted real estate whether you’re buying tax deeds in California or anywhere, at a physical auction or online.
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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.