Buying Tax Delinquent Property Before Auction

I’m Ted Thomas, and real estate has so many opportunities. The challenge is always what’s the market doing? Is it going up or slowing down? It could be overbuilt or maybe there are shortages; the market is always dynamic.

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Eliminating the Guesswork About What the Market Is Doing

To eliminate much of the guesswork for the past 25 years, I’ve focused on tax defaulted real estate. I can comfortably purchase tax lien certificates and earn 16%, 18%, or even up to 36%, and my check comes from the government.

Or, if I prefer, I can buy at tax defaulted auctions using the skills I’ve developed, and I can receive 60%, 70%, or even 80% or more discounts below the tax assessed value. Additionally, the property is free of mortgage.

I can do all of this relatively free of the market volatility.

Timing Is Important: When Is the Auction?

Today, I’m going to answer your question, “Is buying tax delinquent property before auction possible?”

The short answer is yes. However, there may be a better question, do you really want to buy before the auction? Timing is important, and if the auction is only days away, will you have time?

Auction buyers are bargain hunters. Let’s take advantage of how to get the best bargain, and soon you’ll see the best way to do that.

First, we’ll start at the beginning with property taxes.

Understanding Property Taxes

There are very few restrictions once you own the real estate, but there is one thing that must be taken into account, you must pay property taxes once a year.

The property tax is always collected by the office of the county treasury, and each property has its own records. The county administration watches and keeps track of who’s paying taxes.

If the property owner fails to pay property tax, the county treasurer will notify the property owner, and in some cases, place a property tax lien on the property.

Is Buying Tax Delinquent Property Before Auction Possible? 1

What Happens in Tax Deed States?

In tax deed states, nonpayment of property taxes will result in the property owner losing their rights of ownership.

The treasurer will confiscate the property and evict the tenant or owner. However, the treasurer does not want the property. The treasurer wants revenue to pay the county bills. This is where you enter the picture.

The treasurer wants to sell the property and is willing to give you a 60%, 70% or 80% discount from the tax assessed value.

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What Happens to the Mortgage When I Win the Auction?

When you take possession of the property as the new owner, you will receive a deed of ownership. It could be a quitclaim deed or a treasurer’s deed, and the treasurer will also delete the mortgage from the property file.

So is buying tax delinquent property before auction possible? The answer is yes, it’s possible, and I’m positive many owners will be willing to sell. However, the mortgage and any other encumbrances will remain attached to the property.

In other words, the new buyer must pay the mortgage payments, otherwise the lender, probably a bank, will foreclose and take the property.

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What if I Buy Before the Tax Deed Auction?

I’ll give you an example so this is easy to understand. Before I do so, understand the government has power, but in this case, private business is junior to their power.

For example, what if a $100,000 property is purchased prior to the auction for $35,000, and there’s a mortgage loan attached to the title of the property in the amount of $50,000?

When you purchased the property, you bought the roof, walls, driveway and kitchen, and you also took possession of the mortgage.

What Is Lien Priority?

If you don’t take possession of the mortgage, the lender is in a senior position to you and your purchase. The new buyer now owns a $100,000 property and invested $35,000.

However, you must make the mortgage payments or refinance. Therefore, you own the property at $85,000 not $35,000.

The lien law protects the bank, otherwise property owners would walk away from their loans. That’s not going to happen because the loan is attached to the property title.

What Is Clear Title?

Let’s investigate the other side of this challenge. Keeping in mind, I’m answering the question, is buying tax delinquent property before auction possible? The answer is yes, however, you also must pay the mortgage if you want a clear title.

To further answer the question, you now know the mortgage will remain in place when you purchase a property before the auction.

The Big Advantage of Buying at Auction

The reason tax defaulted auctions are so powerful and profitable is that the treasurer has power to not only confiscate and resell, but to wipe out the mortgage.

All parties will be notified of a tax default, the owner, bank and anyone who has a lien on the property.

How to Buy Property With Delinquent Taxes

Let’s visualize when the auction takes place. The county will extinguish the liens and the mortgage, and the treasurer will sell the property to the highest bidder.

If that bidder bid 20% of the $100,000 value, that’s $20,000. If they bid 35% of value, it’s $35,000. So now, the highest bidder gets the property.

If the highest bid is $35,000, that bidder owns the property mortgage-free and has $65,000 in equity or margin between the $100,000 assessed value and the purchase price.

Buying Tax Delinquent Property Before Auction: Conclusion

Let’s review. In a nutshell, if you buy before the auction, all liens and encumbrances remain in place. However, if you buy at a tax defaulted auction, it removes many liens but always removes the mortgage.

If you’d like to know more about bargain real estate investing, 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.

Is Buying Tax Delinquent Property Before Auction Possible? 3You 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!


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