TAX SALE OVERAGES – A SECRET REVEALED
Learn how to make money with tax sale overages. There are more advantages to buying properties at tax defaulted auctions than you think! Most people don’t realize the many opportunities they have to make money with tax defaulted properties!
Today I’ll answer your question about how to make money with tax sale overages.
It sure is interesting to see the unique questions individuals come up with. Tax sale overages is certainly a little-known and highly lucrative segment of the tax lien and tax deed business.
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TAX SALE OVERAGES – TAX SALES
To start with, newcomers must understand that thousands of perfectly good real estate properties are auctioned at public auctions annually.
In the competitive marketplace in upward-trending real estate markets, many of the real estate properties are bid up and sold considerably above the minimum bid price, which at tax auctions is usually about the amount of the delinquent back taxes.
That’s quite low compared to the assessed value.
Tax auctions, also called tax sales, take place in all 3000+ counties across the United States. The properties are auctioned with starting bids of very close to the delinquent back taxes, and anyone may attend the auction.
If you are wondering what’s going on, follow along with me and I’ll explain.
TAX SALE OVERAGES – STATE STATUTES
The state legislature in each state creates the laws, and the state requires the local county board of supervisors or county commissioners to manage the tax collector or treasurer and requires them to execute the statutes.
The legislature requires the county treasurer to levy taxes, collect the taxes levied, and if the treasurer/tax collector cannot collect the taxes, the state legislature requires and authorizes the county officials to seize, that is, confiscate the property.
Once they have possession, the county officials will resell the property at a public auction to the highest bidder. The revenue is used to pay the back taxes.
TAX SALE OVERAGES – PUBLIC AUCTIONS
Many properties in good real estate markets will receive auction bids in excess of starting bids, which is usually the back-delinquent taxes.
All counties across the United States are authorized to have public tax defaulted property auctions. The auction is held in a public place, many times at the county offices or even on the courthouse steps. These auctions are usually public outcry auctions.
TAX SALE OVERAGES – 2 PROCESSES
Now the situation gets very interesting. The tax defaulted auctions have multiple functions.
For example, the county utilizes the auctions to sell and transfer the property from a delinquent property back to a revenue producing property. The revenue from the auction pays many bills.
For example, school teachers, fire fighters, police and sheriff departments, and hospitals, and let’s not forget the county fixes and builds roads. This is a short list of the many bills the county is required to pay.
The auction property has been delinquent. That means it is no longer on the tax roll. The tax roll is a list of all responsible property owners who pay property tax on time.
The actual tax defaulted auction, when a property is sold, generates revenue to pay the delinquent taxes. Simultaneously, the county is selling a deed and recycles a delinquent property from a default list back to the honorable taxpayer tax roll.
Two processes have taken place:
- The back taxes are paid.
- The property is recycled from delinquent back taxes to honorable taxpayers.
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TAX SALE OVERAGES – WHAT IS A TAX SALE OVERAGE?
Competitive markets and savvy investors know, and now you’ll know, the following. This information is almost secret. I’d estimate only 2% or 3% of all tax lien and tax deed investors realize the following.
The property owner who has defaulted may be owed thousands of dollars from this auction. All of the tax money collected at the auction belongs to the owner.
In the competitive markets, properties at tax defaulted auctions are sold over a minimum bid.
TAX SALE OVERAGES – WHO IS ENTITLED TO THE OVERAGE?
The question we are answering is who gets the money over the minimum bid. Who is entitled to tax sale overages?
For example, a property at the tax defaulted auction may have a value of $75,000, yet the minimum bid may be the delinquent taxes of $5,000. This is a significant margin.
The auctioneer, who may be a professional or who may be a county employee, will start the bidding at very close to the $5,000 back taxes. The bidding, which may be competitive, will stop with the highest bidder.
In a competitive market with rising values, let’s assume the property sold at auction for $45,000. The bidder, let’s say the man next door, is happy. The bidder purchased a $75,000 property for $45,000. Everyone smiles and goes home happy.
TAX SALE OVERAGES – WHAT HAPPENS TO THE OVERAGE?
What happens to the $45,000? The auctioneer, the county treasurer and tax collector get all the $45,000 at the auction. The tax collector ultimately distributes $5,000 to the tax collectors account.
The remaining $40,000 in tax sale overages remains with the county!
At most auctions, the county does not own the property, and that money belongs to the property owner.
Maybe the owner died, or in most cases, disappeared? Unfortunately, the county makes little or no effort to contact the desperate owner to inform him or her that $40,000 is sitting in the county treasurer’s account.
I’m not an attorney, real estate broker or CPA, and I’m not giving you legal advice.
I’m just an average person like you that spends a lot of time preparing for auctions and understanding auctions, and then I became a full-time investor and ultimately started teaching about it.
TAX SALE OVERAGES – THE OVERAGE ESCHEATS TO THE STATE
If the property owner fails to come forward to collect the $40,000, which would be impossible if she or he were dead, the county will have a generous gift of $40,000.
The $40,000 will be held and used by the county after a number of years. I don’t have an exact number, but it could be 3 or 5 years. Research will tell you.
Unclaimed tax overages will ultimately escheat to the state. That simply means the state will confiscate that money unless the owner comes forward and demands collection. OUCH!!
TAX SALE OVERAGES – PROFITING FROM OVERAGES
Savvy investors find this information and develop strategies to find that person and that money. It’s never really lost until it escheats to the state.
So how would you make money from tax sale overages? Savvy investors work out deals once they find the previous owner or the previous owner’s relatives. I’m not saying it’s easy. I am saying it’s possible.
I don’t make the rules. I’m just telling you what’s going on. This is happening at auctions across America. It sounds like a hot, easy way to make money. I can assure you it’s not easy.
The challenge is county employees are resentful and somewhat stubborn regarding releasing information, and profit-minded investors are somewhat aggressive trying to get information.
The info is readily available at the public records. Only a few will put in the time to learn the processes built into the laws which the county is following.
After the auction there will be absolute silence from the county. Very few people understand the government systems.
TAX SALE OVERAGES – MAKING A DEAL
Let’s review for accuracy.
- Tax auction assessed price – $75,000
- The auction starts at back taxes and sells for – $5,000
- Aggressive bidders push the sales price up to $45,000
- All $45,000 is paid to the treasurer at the auction.
- The overage is $40,000
What if you could split that $40,000 overage with the owner if you could find them? That would make a nice profit.
There are people who make a job of finding other people. If you could find the owner and tell them where the money is, then maybe you could share it. However, I’d make an agreement before I started telling anybody about it.
The tax sale overages are ultimately going to disappear, and until then, anybody could take advantage of that.
Now, I’m not in the business of teaching you how to do this. I teach you how to profit from tax lien certificates and tax defaulted property investing. However, it is food for thought.
We hope you learned a lot from Ted’s lesson on Tax Sale Overages.
At tax sales, the bidding begins around the amount of the back taxes owed, but at a competitive auction, the bidding may go higher.
If the back taxes are $5,000, and the property goes to the winning bidder for $45,000, yet the property is worth more than $45,000, what happens to that extra $40,000? Who is entitled to that money, and how could you possibly profit from that?
The $40,000 overage belongs to the previous owner of the home who lost that property due to tax delinquency, and the owner probably doesn’t even know about it.
If the owner doesn’t claim that money, then after a period of time, it will escheat to the state. For obvious reasons, counties don’t go out of their way to locate previous owners about tax sale overages.
Some people make a business out of finding these owners to inform them that they’ve got a small windfall available to them in exchange for a share of the overage. It’s not an easy thing to do, but it’s possible and could be quite profitable.
What certainly is profitable is investing in tax lien certificates and tax deeds, and that doesn’t require you to track down people who might not even still be among the living.
Investing in tax delinquent properties is hugely profitable, and if you’d like to know more, there’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Get started today at no cost with Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax lien certificates and tax deed investing.