To answer the question: “What is a tax defaulted property auction?” First it is helpful to know why they are held. Local governments (county, city, township, town, parish) receive the majority of their funding from property taxes. If those taxes are unpaid for an extended time the local governments must take action to collect delinquent taxes, one method is to make a demand for payment and if that payment is not forthcoming the government sells the property to the highest bidder at this auction, in about half the states; the other half sell tax lien certificates. Simply put, it’s an auction by the local government to collect delinquent property taxes.
These auctions are held by local governments throughout the year, as often as once a month in some local counties. The laws regulating a tax defaulted property auction are set by the state legislature and enforced at the local county/ municipality government level. The laws can be different from state to state, enforcement can vary within a state depending upon the county or municipal rules of the sale. There are many common features of a tax defaulted property auction that apply in each individual tax defaulted property auctions, but the rules can vary, so it is essential that you know the rules of each tax defaulted property auction before bidding. Here are some features that that are common to most tax defaulted property auctions:
When buying at a tax defaulted property auction the bidding starts at the back taxes due the local government and the price is bid up, as in a conventional auction.
Most liens on a property (mortgage, deed of trust, mechanic’s liens) are removed when the property is sold at this type of auction; only government liens typically remain.
After a tax defaulted property auction, a few states have a period of redemption (one year or less), where the delinquent tax payer has one last chance to pay the taxes and restore their full ownership rights to the property, before the tax deed buyer can take possession of the property. Most states have no period of redemption, meaning as soon as the tax deed you’ve purchased is paid for with the local government, you own the property free and clear for the price you paid at the auction.
Ted Thomas has guided and taught thousands of tax deed investors the process and how to understand the techniques used by many successful tax deed investors to find the most profitable properties. Over the past 25 years Ted Thomas has become known as America’s Tax Lien Certificate and Tax Deed Authority.
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