How Do You Buy a House at Auction?
Today I’m going to answer your question, “How do you buy a house at auction?”
You’re not alone with this question. Thousands of others are searching for a bargain.
I’m Ted Thomas, and for the past 25 years, I’ve been teaching, guiding and coaching eager-to-learn people on how to buy tax defaulted properties at auction. So, let’s get into this.
Want to learn how to make big profits in real estate? Would you like to buy mortgage-free homes online for pennies on the dollar? Or earn double-digit interest rates secured by real estate? Then you don’t want to miss this FREE Mini Course.
Introduction to Tax Liens and Tax Deeds
Tax deed properties are regularly sold at public tax defaulted property auctions for discounts of 60%, 70%, or 80% less than the tax assessed value.
Over 3,000 counties in the United States will auction real estate, homes, residential lots, office buildings, and small farms at government seized property auctions.
All county governments need money, and the individual states choose to be either a tax lien state or a tax deed state. The difference is, in one case, you’ll get the property, and in the other instance, you’ll receive a certificate.
Tax liens are sold at offline and online property auctions in about half of the states across the United States. Tax deeds are sold at auction in the other half of the states, and they have huge margins between the minimum bid and the market value.
Understanding Unpaid Property Taxes
This whole process starts with a property owner who fails to pay property tax. The law in all states requires that property owners pay their fair share of the local county expenses for running the county government.
Property tax rates are generally low in the area of 1% or 2% of the value established by the tax assessor.
For example, a high-valued property pays the same rate as the low-valued property. The total tax at 2% on a $500,000 property could be $10,000 annually. Conversely, on a $100,000 property, 2% is only $2000.
It is safe to say that property owners who do not pay property taxes can expect to hear, in writing, from the county treasurer. If the property owner does not pay, there will be consequences.
Multiple detailed notices will be delivered prior to seizure and confiscation of the property. As surprising as it sounds, the county does not want the property. The county wants the tax revenue.
If the property taxes are not paid, the treasurer will confiscate the property and evict the tenants or owners.
How Tax-defaulted Property Auctions Work
The defaulted property is then sold at a public auction with a starting bid as low as the past due delinquent taxes plus a few fees.
This could be a 60%, 70%, or 80% or more discount below the tax assessed stated value.
It is normal for the county to extinguish the mortgage, deed of trust or security deed from the property records.
Tax defaulted auctions are announced on the county website and in the local newspapers. Many counties will print a brochure and distribute it to all who request it. The brochure may also be delivered to local newspapers and to people at the auction.
Tip #1: Before You Bid at Auction, Do Your Research
How do you buy a house at auction? To get started, go online to the treasurer’s website in the county where you plan to buy, and learn the auction rules.
Make note of any properties that are being auctioned, then research those properties as best as you know how. If you don’t know how to research properties, you need to learn.
Serious auction bidders learn to research. Not just the liens on the property, but the market values. Yes, the mortgage will be wiped out, however, there could be other liens like the IRS Internal Revenue Service.
I have a free gift for you, a special Master Class that will show you how to profit with tax lien certificates and reveal the secrets of tax deed investing. Get your FREE gift today.
Tip #2: Physically Look at the Property
Here is Ted Thomas rule number 1 – Do not bid on a property that you have not looked at with boots on the ground or the boots of someone you trust on the ground. You must look at the property.
I’ve been involved with tax lien certificates and tax defaulted properties for over 30 years, and I’ve attended auctions from Los Angeles to New York and Miami to Dallas and Houston. I’ve seen some pretty amazing mistakes.
Mistakes like auction buyers bidding and purchasing property they have never seen. For some reason, many people think that every property is a bargain.
I can assure you that many properties are not usable and have been destroyed by people, fires and weather. Auction buyers lose their assets because they did not look.
The auction announcements will show many properties. If you are serious, you will evaluate and research the properties you plan to purchase. At most auctions, you will have many choices and alternatives.
Tip #3: Have a Clear Exit Strategy
Tax defaulted property auctions have one objective. Sell the property to the highest bidder, and my experience has shown me there is no telling what buyers will pay.
Amateurs and untrained buyers lose money at auctions because they pay too much. They have not established bid limits.
They have no exit strategy so they don’t know when to stop bidding. They should not be bidding to win, but to make profits.
If you don’t have an exit strategy, you will pay too much and you will lose money.
Tip #4: Buy Low, Sell Low.
There are dozens, probably hundreds, of unique strategies to be successful at tax defaulted auctions. The objective is to buy low and ultimately sell at a profit.
The word auction really excites people. To them, it means bargains. This can be a big problem. Your objective is to buy at a low enough price to get a bargain, not to win at the auction.
Consider fix up, selling, and the ultimate buyer. Do you have a guide, or do you know everything to ultimately profit?
You need to understand the market. Untrained amateurs appear to do well on the surface, but the proof is in the selling.
If you don’t know what the property will sell for, keep your hands in your pockets. Don’t bid.
How Do You Buy a House at Auction?
We hope you enjoyed Ted’s lesson, “How Do You Buy a House at Auction?”
You can get amazing discounts on mortgage-free properties at tax defaulted auctions, but you must know the rules and do your homework.
Avoid making costly mistakes. Do your research. Look before you buy, and know your exit strategy.
If you’d like to know more about investing in tax delinquent property, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!