Can You Buy Tax Deeds or Tax Liens In Texas?
Are you interested in buying properties in Texas? Well, there’s a few things you should know about how it works in this state. Find out if you can buy tax deeds or tax liens in Texas, and more about their system.
I’m Ted Thomas, and today I’m going to answer your question, “Can you buy tax deeds or tax liens in Texas?” Well, you’re going to be surprised, and you’re going to like what you hear. I’m also going to give you some inside tips. Before you go to the auction, you’ll definitely want this information.
I’m Ted Thomas. I’ve been doing this for about 30 years, and I’ve been teaching it for the last 25 years.
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Can You Buy Tax Deeds or Tax Liens In Texas? – Redeemable Deed
We’re going to talk about redeemable tax deeds, because Texas does not sell tax liens. They sell tax deeds, which means a tax defaulted property, and they sell what they call a redeemable tax deed, which simply means that when you buy the deed to that property, it’s redeemable.
In other words, the owner can come back and buy it back from you. However, if they come and buy it back from you, they have to pay you whatever you paid plus 25%.
Think about what I just said. You’re going to make a 25% return.
Can You Buy Tax Deeds or Tax Liens In Texas? – About Texas
Now, let’s talk a little bit about Texas. First of all, it’s a big state with 254 counties. Harris County, Houston has the largest population, followed by Dallas.
They hold auctions in Texas every month. That means they’re authorized to have 254 auctions every single month. You can spend the rest of your life there and never leave Texas, and you’ll find a lot of auctions.
Can You Buy Tax Deeds or Tax Liens In Texas? – Property Possession
Now, what do they sell? When the property owner does not pay their property taxes, the treasurer will put that property in default and sell a redeemable deed to that property at auction. That means they will auction off the deed.
When you buy a deed, the deed is usually a transferable device to you. Well, you’re not going to get a property. You don’t get possession, but what you have is the deed.
Can You Buy Tax Deeds or Tax Liens In Texas? – Interest Rate
The deed is like a tax lien certificate. It’s a piece of paper. You’re going to get that deed, and the deed will earn you 25% in one day.
Any day from day 1 to day 180, if you own that deed, and the property owner comes in and redeems (pays for it), they have to give you back all your money plus 25%.
Let’s think about this. If you bought a deed for $50,000, the property owner can come in and buy it back from you by adding 25% to that. That would be $12,500 in 180 days. Think about the return!
The whole state is like that. So Texas is a (redeemable) tax deed state.
Can You Buy Tax Deeds or Tax Liens In Texas? – Deed of Trust
In most cases, at a tax lien or tax deed sale, the mortgage is wiped out. That doesn’t mean the mortgage is torn up; that means that it’s cleared off the property.
In a redeemable tax deed state, the mortgage, or in this case, it’s a deed of trust, is going to stay on the property.
Can You Buy Tax Deeds or Tax Liens In Texas?
The Buyer is Responsible For the Deed of Trust
The good news is in Texas, when you buy a redeemable deed, you’re going to earn up to 25%. The challenge, which most people don’t understand, is that the deed or trust is not wiped out in Texas.
In a tax lien or tax deed state, the mortgage is wiped out. While, in Texas, it’s going to stay on the property.
When you buy a redeemable deed property in Texas, you either get back whatever you paid plus 25%, or you get the property. If you get the property, you’ll be responsible for that deed of trust.
Can You Buy Tax Deeds or Tax Liens In Texas? – Texas Auctions
What does all this mean to all of you? You cannot buy tax liens in Texas. It’s a tax deed state. So, why is the county selling these redeemable deeds? The county needs money.
If you go to a big auction, like in Harris county, you’ll see 10 or 12 auctioneers in the same room auctioning different properties at the same time. So, you’ll have to pick which to go to, but why are they auctioning?
They’re auctioning because they did not collect back taxes. What are they auctioning? They’re auctioning a redeemable deed, and the deed of trust (loan document) stays on the property.
Can You Buy Tax Deeds or Tax Liens In Texas? – Two Ways to Profit
How do you make money? You make money in two ways in Texas, and you make powerful amounts of money.
If you raise your hand to buy, offline or online, you’re buying a redeemable deed. When you do that, if they come in one day and pay you, you’re going to get all your money plus 25%.
Can You Buy Tax Deeds or Tax Liens In Texas? – Redemption Period
The property owner has 180 days to pay you; that’s six months. They can recover their deed any day in 180 days, and that means you’re going to make 25%. It’s a great investment.
Sometimes it can roll into a second year, but that has to do with agricultural properties. I don’t want to confuse you on this one. I want to make sure you get it. So, that should be clear.
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Can You Buy Tax Deeds or Tax Liens In Texas? – Buying a Redeemable Deed
Anyone can buy a redeemable deed. You just have to be the top bidder at the auction. The highest bidder gets it.
How do you know what to do? Well, first of all, I wouldn’t just show up at the sale and start bidding if I was an ameteur. I would go to the sale two or three times to observe the auction because it’s confusing between the deed of trust, the mortgage and the redeemable deed.
A redeemable deed is the deed that would normally transfer the property. That deed goes to the auction buyer.
The deed of trust is nothing more than a promissory note. So, try to keep those two clear in your mind, and don’t let anybody trick you and let you think that the mortgage is wiped out. It’s not. The deed of trust will stay on that property.
Can You Buy Tax Deeds or Tax Liens In Texas? – Redemption Rate
After the auction takes place, the property owner can come back and redeem any day for 180 days. 95% to 97% of these people will come in and redeem.
In other words, they will pay you whatever you paid plus a whopping 25%.
Can You Buy Tax Deeds or Tax Liens In Texas? – Research
How do you do your research? Well, let’s think this thing out just a little bit. A lot of properties will be in the $300,000 to $500,000 range.
If they’re selling a property that has that kind of value, and it has a $200,000 mortgage on it, you’ve really got to think about what you’re doing because the mortgage is staying with the property.
If it’s worth $300,000 and the mortgage is staying with the property, you’d better really think about how much you’re going to bid
Can You Buy Tax Deeds or Tax Liens In Texas? – Bidding
What if you decide to bid $100,000, and you’ve got a mortgage for $200,000. You’re at retail value. So you need to understand what you’re doing at this auction.
If you bid $100,000 and the property owner does not come in and redeem, you now have a $300,000 property that you paid $300,000 for. That’s not profitable.
The point is a little education would go a long way. With just a little bit of education, you can make 25% on every single property that you buy in Texas.
There are other redeemable deed states. Georgia is another one.
Can You Buy Tax Deeds or Tax Liens In Texas? – Types of Deeds
This question comes up on a regular basis. What kind of deed will you get for an auction property?
If you’re talking about Texas, you’re going to get a redeemable deed.
If you’re talking about at a regular auction, they could give you a treasurer’s deed or a quitclaim deed. They could give you anything but a warranty deed. The county is not going to warranty your property.
Can You Buy Tax Deeds or Tax Liens In Texas? – Quitclaim Deed
Get nervous when you get a quitclaim deed. That means the county is disclaiming any responsibility, and you now have the responsibility.
Don’t think a quitclaim deed is something that’s easy to handle. You will have to do a quiet title if you get one.
Can You Buy Tax Deeds or Tax Liens In Texas? – Conclusion
We hope you enjoyed Ted’s lesson, “Can you buy tax deeds or tax liens in Texas?”
If you’d like to know more, there’s no one more qualified than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing, to teach you how to do this.
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