California Tax Sale

Did you know a California Tax Sale is where you could find the opportunity of a lifetime? Few would argue that a home is the most important purchase most people make in their lifetimes.

What if I told you that you could buy a house in California for 50% or more under the market price? Do I have your attention now? Then keep reading because that’s exactly what I’m going to share with you.

Let’s look at why California is a state completely unto itself in many ways.  It has the biggest economy in the country. 

That’s saying quite a bit considering the United States still has the largest economy in the world.  It also has the highest population in the country, by a significant amount. 

To understand the significance of these two facts, let’s first put them into perspective. 

California: A Country unto Itself

The economy of California is the largest in the United States with a $3.2 trillion gross state product as of 2019.

If California were a sovereign nation (in 2019), it would rank as the world’s fifth-largest economy, bigger than India, and slightly smaller than Germany.

California’s Silicon Valley is home to most of the world’s most valuable tech companies: Apple, Alphabet Inc., and Facebook. Almost 15% of the Fortune 1000 companies were based in California in 2018, more than any other state.

That first fact is worth taking a look at a second time. Again, if it were a country, California would be the 5th-largest economy in the world.

It has a GDP of $3.1 trillion (2019) and a GDP growth rate of 2.6% (2019). The GDP per capita was $80,563 (2019-Q4).

The population below the poverty line was 13.3% (absolute) 19.0% (relative), and it had a Labor force of 19,286,476 (December 2017).

The Unemployment rate was 3.9% (Feb. 2020). Its state budget for Expenses was $220 billion (2011–12).

As both the most populous US state and one of the most diverse states in terms of climate, the economy of California is varied, with many sizable sectors.

The biggest part of the economy is finance, business services, government, and manufacturing.

A large part of the economic activity is concentrated in the coastal cities, especially Los Angeles, which is well-known globally for the film industry.

The San Francisco Bay Area is considered the tech capital of the Western world. Both Los Angeles and San Francisco, as well as San Diego, also act as major trade hubs to and from the United States.

Furthermore, California’s Central Valley is one of the most productive agricultural regions on Earth, growing over half the country’s fruits, vegetables, and nuts.

In one of our last articles, we discussed back taxes land for sale, Texas specifically.

This is a continuation of that theme because California has a similar system, in which at a California tax sale we can acquire tax deeds on properties that have back taxes due on them. 

As a result of that article, several questions have been asked of me.  My West Coast friends are asking, “How can I get in on this great investment opportunity?”

When we discovered the deals that were available in Texas, my friends in Southern California and Sacramento became interested in how they could get started where they lived.

They asked me, “Does a tax sale work in California, exactly the same as Texas?” 

My answer was that California sells tax deeds, just like Texas, but with one big difference: In California, once the property gets sold at an auction, the property owner almost never can redeem the tax deed.

So a California tax sale is an opportunity that may offer another amazing chance at profiting.

California Tax Sale: A Chance to Prosper

If you’re willing to learn from a reliable source of information and even more so if you have a good guide, a California Tax Sale can offer houses in the most expensive housing market in the country at amazing bargains. 

With the right information and techniques properly applied, and some good old-fashioned detective work, getting a property for 25-50% off market value is not unheard of.

The Time Is Ideal for a California Tax Sale

Currently, the whole country and much of the world is in an economic downturn.  

Unemployment is at an all-time high; businesses are closing, and people are panicking. Unemployment benefits are being requested at the highest rate in modern history.

Many economists are stating that it may take the country years, even a decade, to get back to where the economy was before this crisis. 

On top of that, California has one of the highest home costs and relatively high property tax rates. California is incredibly beautiful, but it has a high cost of living. 

Additionally, the unemployment crisis has hit California worse than most other states. 

There are too many factors to mention involved with the economy’s downturn, and even more things required to get it to turn around. 

So how is a good time for a California tax sale or any investment for that matter? Because many people have been unable to pay their property taxes. 

As a result, there are once-in-a-lifetime opportunities to be found at a California Tax Sale. Let me explain what this is and how it comes to pass. 

It’s determined by how long property taxes can go unpaid in California. The answer depends.  The quick answer is five years. In most cases, that’s all we need to know. 

In some cases, however, it’s only three years.  That’s because when the property becomes an eyesore due to lack of upkeep or falls into disrepair, often a nuisance lien is placed on the property. 

It’s logical that when someone is unable to pay their property taxes, then they often don’t have the ability or willingness to bring their property into compliance and pay off any nuisance liens against the property. 

How Properties Get to a California Tax Sale

In either one of these cases, after 3 or 5 years, the property would go on what’s called the California Delinquent Property Tax list.

Of course, property owners can pay their back taxes.  As long as it’s within the California Tax sale redemption period, their property can be redeemed. 

If they do not go through the California Tax sale redemption by July 1st, the California State Comptroller allows each individual county to list the property on the Controller’s official website

The property would then appear, for example, on the Riverdale County tax sale list.  So even though we’re looking at a California Tax Sale, we have to zero in and look closer, to individual counties. 

Another example would be where we would look at tax deed sales in Sacramento.  At their tax sale auction, you would look for properties that suit your goals. 

When a property goes from the California state comptroller’s delinquent property list to the individual county’s list, such as the Riverdale County tax sale, this is where you would actually be bidding on the property if you were interested in buying it.

This is where the real homework begins.  However, many people who make it this far in the process still haven’t done enough research to be properly prepared to make knowledgeable bids and buys.

I would never recommend that anyone bid on, and buy a property without the proper knowledge. You must know the rules and do your homework.

The actual bidding process is held on Bid4Assets.  But again, before doing any bidding and buying, research and investigation needs to be done. 

There are a lot of different terms and terminology involved in the field.  You might hear tax deed auctions, tax property auctions, tax-defaulted properties, or other terms.

In California at least, they all refer to the California tax sale.

The Role of the State Controller

In California, the department in charge of a California tax sale is the State Controller. 

They have general supervision over county tax collections and provide for tax levying and collecting procedures.  Duties include the sale of tax-defaulted lands.

Their entire objective in holding a tax sale is to return the tax-defaulted property to the county tax rolls and keep the tax dollars supporting the community services and county governments that depend upon those funds. 

This is accomplished either through redemption or by sale to a responsible owner.

Like Cinderella’s chariot, unpaid property taxes, at 12:01 a.m. on July 1 become tax-defaulted land.

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. 

This is in order to satisfy the defaulted taxes. The county tax collector must attempt to sell the property within four years after it becomes subject to sale.

The county tax collector may offer the property for sale at public auction, through a sealed bid sale, or through a negotiated sale to a public agency or qualified nonprofit organization.

How California Tax Sales Are Held

These tax-defaulted properties are usually sold at public auctions. Almost always, the auction is held by the tax collector, and the property is sold at the highest bid.

California counties do not sell tax lien certificates; what is sold is a tax deed. This is where the winning bidder gets the right to the deed of the property. 

Information about upcoming tax sales may be obtained from the individual counties. Nowadays, almost all of the counties have websites and place their tax-sale information there.

Starting at a minimum of three weeks prior to a county tax sale, the tax collector has to publish a list of the properties three times in a newspaper within the county.

Information for Bidders

Tax-defaulted property owners have the right to redeem the property, which is to pay the back taxes plus any penalties, up until 5:00 p.m. or the close of the last business day before a California tax sale.

The minimum bid is the amount to redeem the property plus the costs taken on by the county.

Most auctions used to be held in person and conducted by the county tax collector. Now, each county may be different. More auctions are moving online.

Some counties require advance registration and a deposit, some do not.

Bid cards may be assigned to aid in identifying bidders during the course of the sale.

Payments were made in cash or certified funds, at the physical auctions. Personal checks usually were not accepted.

The bid winner must pay, the bid amount, and a county transfer tax of $0.55 per $500 of the sale price.

There is a one-year statute of limitations for the delinquent property owner to bring an action to overturn a California tax sale. Almost no title companies will issue title insurance until after the statute of limitations has expired.

I will add that for the property owner to have success in such an auction is very difficult and expensive. 

Before Buying at a California Tax Sale

We, as buyers, have to do our due diligence on whatever property we plan to purchase.  We have to research before we invest.

No counties will guarantee the condition of the property, nor are they responsible for its conformance to codes, permits, or zoning ordinances.

Property is sold AS-IS.  It could be damaged, in code violation, or have liens and encumbrances. 

Liens and Encumbrances, and other exceptions…

Tax-defaulted property by the county tax collector is free of all encumbrances in place before the California tax sale, except for:

  • Liens for installments of taxes and special assessments, which installments will become payable on the secured roll after the time of the sale.
  • Liens for taxes or assessments or other rights of any taxing agency that does not consent to the sale.
  • Any liens for special assessments levied on the property that was, at the time of the sale, not included in the monies necessary to redeem the property, and where a tax agency that does its own tax collection has consented to the sale.
  • Easements, which you need to look up, constituting servitudes upon or burdens to the property; any water rights; or title that is held separately from title to the property; and restrictions of record.
  • Any unaccepted, recorded, irrevocable offers of dedication of the property to the public or a public entity. It doesn’t matter if it is for a public purpose and recorded options of any taxing agency to purchase the property or any interest therein for a public purpose.
  • Any unpaid assessments under the Improvement Bond Act of 1915 that are not satisfied as a result of the sale, again you need to look this up.
  • Internal Revenue Service liens that are not discharged by the California tax sale, some may be, most are not.
  • Any unpaid special taxes under the Mello-Roos Community Facilities Act that are not satisfied as a result of the sale, again, it’s time to do your homework…
  Are California Tax Sales a Second Gold Rush?

In 1855 the California gold rush ended. Could California tax sales be a second gold rush?

With much of the country’s most expensive real estate, there are amazing opportunities at California tax sales.  There are deeds to be had, on valuable properties, at a fraction of the value to savvy investors. 

There are so many ways to earn fantastic returns that this is definitely one state that deserves a close look. 

Once acquired, the property can be sold quickly, for a fast profit, or even owner-financed for residual income. 

While it is somewhat rare, there are actually properties that bidders can acquire for less than is owed in back taxes.  There are Ted Thomas students who have bought properties for 10-50% of their market value. 

You will have to study the individual county’s laws, websites, auction lists, and property evaluations.  You will need to do research and have a system in place if you want to be successful. 

Locating Tax Lien and Tax Deed lists have changed dramatically over the past 20 years.  Before the internet-age, local newspapers were often the only place to obtain tax sale lists.

Fortunately, the internet has made it much easier to locate tax sale properties.

Many if not most counties have put the information needed to take advantage of tax sales online, if you know where to look and what to look for.

Don’t Miss Your chance to Get Involved in a California Tax Sale

This article barely skims the surface of what’s involved in the process.  To be sure, there are more questions that are beyond the scope of this article. 

Feel free to dig deeper and explore the subject because the word is starting to get out that the California Tax Sale offers some amazing investment opportunities.

That’s because thousands of smart investors are turning tough economic times into huge profits.  You can be like them. 

In Conclusion

The economy of California is the largest in the United States, and even larger than most countries. Even now, opportunities abound in California, particularly in the area of tax defaulted property.

A California tax sale is an amazing opportunity to acquire property for pennies on the dollar for quick resale with the right exit strategy.

Now that these tax sale auctions are increasingly moving online, you can buy California tax defaulted property from anywhere, even from home in your pajamas. 

The California tax sale can be a gold mine, but it’s important to know what you’re doing.

Ted Thomas can teach you more about the California tax sale, or anything related to tax liens and tax deeds anywhere in the country. Many of Ted’s students have gone on to become successful investors.

To get you started to today, Ted’s offering you a FREE course on tax liens and tax deeds, the Safe Haven Investor System – a $197 value at no cost to you with promo code: GIFT

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