Tax Deed Investing Hidden Costs: 11 Fees After You Win

Key Takeaways

• The winning bid is only the down payment. The tax deed investing hidden costs, fees, surviving liens, repairs, and holding costs, are what decide whether you profit.
• An auctioneer fee of 7% to 13%, plus county transfer, recording, and setup fees, stacks on before you ever get the keys.
• A tax deed wipes out mortgages and other private liens, but municipal code liens and a federal IRS lien can survive the sale and become your problem.
• A federal IRS lien stays on the property for 120 days after the auction. If the IRS does not claim it in that window, the lien drops off.
• Vacant lots are the lower-risk way in. No eviction, no roof, no foundation, minimal cleanout.
• Do the math before you raise your hand. Walk the property, run the title, and set a firm maximum bid at 20 to 40 cents on the dollar.

Tax deed investing pays. I’ve been doing it for over 30 years. But tax deed investing hidden costs are the part of this business most promoters on YouTube will not show you. They are the part that decides whether you actually make money or you quietly lose it.

The auction price isn’t the cost. That’s just the down payment.

I’ve watched students pay $14,000 at a tax deed auction and then be required to pay another $20,000 before they could resell. Not because they did anything wrong, because nobody told them the closing costs, title work, cleanout, recording fees, transfer fees, and code violations were all part of the price.

That’s real. That happens. The version where it works is the version where you know every cost before you raise your hand. The bid is the easy part. The math after the bid is what separates the people who make money from the people who learn expensive lessons.

Auction Fees That Stack Before You Get the Keys

So you won the auction. Congratulations. Now let me show you what happens at the back table.

As soon as you buy at the auction, you’re not only going to have your winning bid, but you’re going to have an auctioneer’s fee to pay. That fee is usually anywhere from 7% to 13% (varies by state and county), usually on the high side. So on a $14,000 bid, you’re adding roughly another $1,800 right there before anything else hits.

Then the county is going to transfer the property to you, and they’ll charge a transfer fee for that. The county might have two or three different fees, a transfer fee, a setup fee, a recording fee, whatever they call it. You’ll pay all of those before you ever get the keys. If you’re doing this online, you’ll see all those fees listed. If you’re at a live auction, they’ll hand you a stack of papers with a number bigger than the one you just yelled out.

I’ve seen people put up $14,000 at the auction thinking, “Okay, that’s all I have to worry about.” But that isn’t the case. By the time they get done with all their fees and then they go to get ready to resell, they’ve got a lot more fees to pay.

What the County Won’t Tell You, Because They Don’t Have To

Here’s the thing about the county. The county isn’t a conspiracy. They’re not trying to cheat anybody. They’re just trying to follow rules.

The county gets all their direction from way up at the state government. The legislature makes the rules. They tell the county: collect the tax. If you can’t collect the tax, seize the property, resell it at auction, use the money to pay the tax. That’s it.

But the county is really an administrator. They’re bureaucrats working in various buildings around the county, and they’ve got bigger problems than your auction fees.

What pays for the roads? The county. Who trains the sheriff and buys the fire trucks? Also the county. And the biggest bill the county has? The schools, teacher salaries, building maintenance, all of it.

So when it comes to buying and selling these properties, the county just wants to get rid of the property, get the cash, and pay the bills. They don’t have the time, the staff, or the legal obligation to walk you through every hidden cost. That’s your job.

The Hidden Travel Bill

Now with the internet, you can do a lot of this online, which reduces your costs. But if it’s a live auction, you want to be there. There’s a transportation cost. There’s a lodging cost. You could easily spend $3,000 or $4,000 just getting to the auction and getting boots on the ground to look at the property.

I insist my clients go look at that property. Get boots on the ground. That might mean flights, hotels, rental cars, or taking a buddy to help take pictures while you drive.

Before you go to your first auction, make sure you understand the full cost picture. Explore Ted Thomas’s free introductory resources to learn the system he’s used for 30+ years.

Title Traps, Which Liens Survive and Which Die

Here’s where people really get hurt. They think because they bought from the county, the title is clean. It is not.

The Good News: Private Liens Get Wiped Out

When you buy a property from the tax collector, the mortgage and the deed of trust are wiped out. Car liens, dentist bills, personal lawsuits, those private liens get extinguished. That’s one of the reasons this business works. You can buy a house that had a $100,000 mortgage on it and that mortgage disappears.

The Bad News: Municipal Liens and Code Violations Survive

But the liens you have to worry about are municipal liens and the federal IRS lien.

Code enforcement liens stay on the property. Usually they’re negotiable, but sometimes they’re not. And here’s the kicker, municipalities can run those code violations at $200 a day. So if you haven’t fixed the code violation in two weeks, you owe them a lot of money.

People running out of money stop taking care of the house first. They’re not going to paint it. They’re not going to take care of things. So by the time the tax collector takes action, that property could have one or two years of code violations stacked up. You buy it, you inherit it.

The Deal-Killer: IRS Liens and the 120-Day Redemption

Every property that’s sold could have an IRS lien on it. Now, only a very few actually do, because the federal government doesn’t want houses. But if you’re buying bigger properties, $200,000, $400,000, whatever, they could have an IRS lien.

If the treasurer does his job, he’ll give notice to the IRS that the property’s coming up for auction. If the IRS gets notice and the property sells at auction, the IRS lien stays on that property for 120 days. At the end of 120 days, if the IRS doesn’t come forward and say “I want the property,” that lien drops off.

Here’s what this means for you: if there’s an IRS lien on it, that property might not be one you want to bid on. That lien could be $50,000, $100,000, or $500,000. So it’s important to know that before you bid.

Post-Possession Costs Nobody Warns You About

Once you own the deed, the costs don’t stop. They start.

Eviction Timelines and Attorney Fees (30 to 90 Days)

Everybody worries about eviction. People tell a lot of bad stories, but basically the county will have told the people to leave. In most cases, the property will be emptied.

But let’s say there are still people in there. Most of them aren’t hostile. You knock on the door and say, “Look, you’re going to have to leave. Here’s my deed.”

Even though you told them, they might not leave. They don’t have any money, that’s the problem. Some people give them a check to get them out, but they don’t hand over the check until the former owner is actually out.

But here’s the cost: you’re going to hire an attorney to send notices. That takes anywhere from 30 to 90 days before they’re out. Every month they’re in there, you’re holding costs, property taxes, maybe utilities, money out of your pocket.

Cleanout, Security, and Property Prep

Once you get them out, they leave their old furniture. They leave their junk. They won’t take out the garbage. The property is used and abused.

I tell people: just clean it. Don’t fix it up. If you start fixing it up, money is going to pour out of your pocket. Fixing up properties really costs a lot of money.

Get it cleaned. Change the locks. Maybe board a window. Then start marketing it.

The Syracuse Roof Story: An $18,000 Auction That Became Six Figures

Let me tell you about a property I bought just outside of Syracuse, New York. I bought it during fall when winter was coming. And believe me, it gets cold up there.

I paid only $18,000. The assessed value was $130,000 to $150,000. I had margin. Nice spread.

But the one thing I couldn’t see, because I didn’t climb up on the roof, was that the roof was leaking.

Right after I bought it, it snowed. The next day it warmed up and melted. That night it froze. Water got under the roof, thawed the next day, and started dripping inside.

You’re not going to sell a property with a bad roof. Before I got finished with all the fix-up, I was almost six figures into that property.

If I hadn’t figured out the after-repair value, the ARV, before I bought, I would have emptied my bank account. I had to fix that roof multiple times during the winter because we couldn’t get the whole roof back on before it snowed or rained again.

The point is: if you don’t walk on that property and look at all the details, you’re going to have troubles like that.

Code Violation Liens: The $200-a-Day Surprise

Remember what I said about code violations? The county didn’t create them. The previous owner did. But they survive the sale. And at $200 a day, two weeks is $2,800. A month is $6,000.

This is why I say the math after the bid separates profits from lessons.

The “As-Is, Caveat Emptor” Reality Check

Why doesn’t the county tell you about these costs upfront? Are they hiding them?

No. The county isn’t hiding anything. All the rules are on the auction site, sent to you in writing. Whatever way you want them, you can have the auction rules.

But here’s the two most important words at every tax deed auction: as is.

That means the county is not responsible for anything physically happening on that property. They didn’t own it, they seized it and they’re selling it.

Secondly, the county is not responsible for whether you checked the title. Did you know there were code enforcement liens? Repairs needed? That’s your responsibility.

Every property is sold with a notice called caveat emptor. It’s a Latin term, very popular in real estate. Means buyer beware.

When you raise your hand at that auction, I’m telling you right now: you now have the responsibility for anything physical on that property and anything on the title.

Don’t get in a bidding war and start bidding that price up because you don’t know what’s wrong with that property. If there had been a lot of bidders on that Syracuse house and they’d bid it up to $50,000 or $75,000, they would have been in trouble. They’d have run out of money by the time they paid the auctioneer and then kept repairing that roof.

So let’s be clear: we’re not there to win the auction. We’re there to get the best price on the property.

How to Calculate Your Tax Deed Investing Hidden Costs Before Bidding

Want to know if you’re going to make money or learn an expensive lesson? Do the math before you raise your hand.

Step-by-Step Total Cost Formula

True Total Cost = Bid + All of the Above

Margin Rules: Buy Low, Sell Low

I teach people to buy low, sell low, not sell high. Here’s why. When you sell low, you leave enough margin in for the next person. You sell it to the fixer-upper guy or gal who already has money set aside for appliances, floors, paint, and rehab.

All the money in this business is made when you buy. Everything else is just a procedure.

Printable Pre-Bid Research Checklist (5 Steps)

1. Boots on the ground, Walk the property. Look at the roof, the foundation, the neighborhood. If you drive in and roll up your windows because you’re afraid, drive back out.

1. Check the comparables, What’s it worth fixed up? Use Zillow, the MLS, Google. Know your ARV before you bid.

1. Run the title, What’s owed? Mortgages get wiped out, but code liens and IRS liens might not. Find out before you bid.

1. Set your max bid at 20 to 40 cents on the dollar, I get nervous at 30%. I almost never go above 40%. You need margin for the unknown.

1. Know your exit before you enter, Who’s going to buy this from you? A homeowner? A fixer-upper investor? How fast can you sell it?

The Lower-Risk Way In: Start With Vacant Lots

If you want to reduce your risk, here’s one of the best ways to do it.

A tax defaulted auction sells rental properties, regular houses, vacant lots, subdivisions, rural land. Most people only look at the houses. They want the white picket fence. They want to fix it up and get rich.

If you want the cheapest way in, a few states have dirt-cheap tax deeds worth a close look.

But what about the lots?

Say there’s a $300,000 house. The lot’s probably worth $60,000. But the tax on that lot? Maybe $4,000, $5,000, or $6,000. People don’t bid on lots because they never thought about building a house. So they ignore them.

Ted explains: a lot bought for $6,000 at auction might be worth $25,000 after a simple clean-up, cut the grass, move an old car, and resell for $20,000 or $25,000. I just paid a lot of bills around my house.

I have clients who’ve done a hundred of those over the years. Residential lots. Five-acre lots just outside of town, just make sure they have water and power.

You don’t have to buy a house to get rich. You can buy a lot of these residential lots, get rich, and not have a lot of risk. No eviction. No roof. No foundation. Minimal cleanout.

People buy them and forget they own them. I don’t know why, but they do. And those go to auction.

Probably the biggest thing I ever did was attend many auctions in many cities and many states. Then I began my bidding process. Watch what other people aren’t doing, that’s maybe what you should be doing.

When Tax Deed Investing Still Makes Sense

I’m not here to scare you out of tax deed investing. I’m here to scare you into doing it right.

This business works. I’ve been doing it for over 30 years. I’ve bought properties I thought were worth $400,000 or $500,000 for 20, 30, 40 cents on the dollar. I’m not bragging, I’m telling you the neighborhood I’m trying to buy in.

The bid is the easy part. The math after the bid is what separates the people who make money from the people who learn expensive lessons.

The county sells as-is. Caveat emptor. Buyer beware. They don’t owe you a clean title. They don’t owe you a new roof. They don’t owe you disclosure. They owe you the deed, and they owe the schools the tax money.

So before you raise your hand, add up the tax deed investing hidden costs first. Know your total cost. Know which liens survive. Know your repair reserve. Know who you’re going to sell to. Know your max bid.

And if you’re just starting out, maybe start with a $6,000 lot instead of a $14,000 house with a leaky roof.

Tax deed investing is a kitchen table business. You can do it from home. You can do it part-time. But you have to do it with your eyes open.

Buy low. Sell low. Leave margin for the next person. And never, ever bid on a property you haven’t walked.

Want a structured place to start? Explore Ted Thomas’s free introductory resources or book a strategy call with the team.

Frequently Asked Questions

What are the hidden costs after winning a tax deed auction?

Beyond the winning bid, you typically pay auctioneer fees of 7% to 13%, county transfer and recording fees, title search costs, travel, municipal code violation liens, a possible IRS lien hold, eviction and attorney fees, cleanout and security, and a repair reserve. Add them all up before you bid.

Do liens survive a tax deed sale?

Private liens such as mortgages and car liens are wiped out. However, municipal code violation liens and federal IRS liens can survive the sale and become the new owner’s responsibility. What survives depends on state law, so review the title before you bid.

How long does an IRS lien stay on a property after a tax deed auction?

If the IRS receives proper notice and the property sells at auction, the federal lien remains on the property for 120 days. If the IRS does not exercise its redemption right within that window, the lien is extinguished.

What is the safest way to start in tax deed investing?

Start with vacant residential lots rather than occupied houses. Lots have no eviction risk, no roof or foundation issues, and minimal cleanout costs. Lots bought for $6,000 to $10,000 can often be resold for $20,000 to $25,000.