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.
Before we get ahead of ourselves, let’s look at why California is a state completely onto 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 Tax Sale: a Country Onto Itself
The economy of California is the hugest 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. Can you believe 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 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. To see how amazing California’s economy is, check Wikipedia, here.
Our last article discussed back taxes land for sale, Texas specifically. This week 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. Basically, my West Coast friends are asking, “How can I get in on this great investment opportunity?”
OK, I get it, I made a convincing argument. When we discovered the deals that were available in Texas, my friends in Southern California and Sacramento became interested in how they could get a started where they lived. My friends then 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 in Tough Times
If you are 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 Property
Its a painfully obvious fact that the whole country and much of the world is in a huge economic downturn. To see how bad it looks, see the Brookings institute’s report here.
Unemployment is at an all-time high, CoVid has businesses 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 where it’s economy was before this crisis. To see how long some experts think it will take to recover economically, click here.
On top of that, California has one of the highest home costs and relatively high property tax rates. Its common knowledge that California is incredibly beautiful, but it has a high cost of living. And it’s an unfortunate fact that in addition, the unemployment crisis has hit California worse than most other states. See the bureau of labor and statistics information on the hit California’s economy took here.
There are too many factors to mention involved with the economies’ downturn, and even more things required to get it to turn around. So with all the gloom and doom out there how can I sound optimistic that now is a good time for a California tax sale or any investment for that matter?
Because all of this bad news means that many people have been unable to pay their property taxes. As a result, there are once-in-a-lifetime opportunities to be found at something called a California Tax Sale. Let me explain what this is and how it comes to pass. It’s related to 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, its 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 Do Properties Get to a California Tax Sale?
So 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. Click here to see the Controller’s official website.
The property would then appear, for example, on the Riverdale County tax sale. So even though we are 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 into properties that fit what you are looking for. Sacramento Counties’ website is available here.
Another example would be 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, which is where you would actually be bidding on the property if you were interested in buying it.
This is where the real homework begins. I have learned enough through the people at Ted Thomas.com, to know that many people who make it this far in the process still haven’t done enough research to be properly prepared to make intelligent bids and buys.
Accordingly, I would never recommend that anyone bid on, and buy a property without the information and help of an expert in the field. I can’t think of anyone better than the people at TedThomas.com. Not only do they have a wealth of information readily available, but they have a helpful staff that holds regular conferences, and they even have coaches to personally walk clients through the process that they themselves have done.
The actual bidding process is held on a site called bid4assets.com. But again, before doing any of the bidding and buying, lots and lots of research and investigation needs to be done. I had no idea how much information was required.
There is a whole lot of different terms and terminology involved in the field. You might hear about tax deed auctions, tax property auctions, tax-defaulted properties, or any 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 those for 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. Once again, to go straight to the source, the Controller’s website, click here.
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. As we have already discovered, California counties do not sell tax lien certificates, so what is sold is a tax deed. This is where the winning bid gives the right to the deed of the property. For more information about the auctions, click here.
The basic 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 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, again, which is to pay them back taxes plus any penalties, up until 5:00 p.m. or the close of the last business day before the tax sale. The minimum bid is the amount to redeem the property plus the costs taken on by the county.
Most auctions were held in person and are conducted by the county tax collector, (pre-CoVid-19). Now especially, each county may be different. 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 the 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 tax sale. Almost no title companies will generally not 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. This is good news for those of us who are buying the tax deeds.
Also know that we, as buyers, have to do our due diligence on whatever property we plan on buying. 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 nightmare exceptions…
- Tax-defaulted property by the county tax collector is free of all encumbrances in place before the 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 does its own tax collection has consented to the sale.
- Something called 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 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, its time to do your homework…
In 1855 the California gold rush ended. Are California tax sales 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 second 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 students of Ted Thomas that have bought properties for 10-50% of their market value.
So you will have to study the individual counties’ laws, websites, auction lists, and property evaluations. To some degree, you are going to have to do lots of research, and have a system in place if you want to be successful. The people at Ted Thomas can help you learn how to do all of this and more, to save countless hours and thousands of dollars.
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 lists. Many if not most counties have put much of the information needed to take advantage of California tax sales, on the net, 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 many 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.
Let’s end with my suggestion to stop bemoaning how bad the economy is, and how difficult your financial situation might be looking. You can do something about it. Do what I did and give Ted Thomas.com a visit. Ask them about the California tax sale, or anything related to tax liens and tax deeds anywhere in the country. When you do and follow the steps of the many successful investors who have, you will be more than happy you followed my advice.