People are making big profits every week by investing in tax sale properties. You can make big profits too, if you know the rules and do your homework.
What Are Tax Sale Properties?
Tax sale properties are real estate sold to collect the past due property taxes. The proper name for this kind of property is “tax defaulted property.”
The property is sold at a tax defaulted property auction. The auction is open to the public. Anyone with enough money to buy a property can attend and buy tax sale properties.
“The Annual Tax Sale is a yearly auction of delinquent taxes at which a tax buyer may pay the delinquent taxes due on a parcel. A property owner whose taxes were sold may “redeem” their taxes by paying the amount of sale (plus interest) to the tax buyer in order to avoid loss of property or ownership,” says the Cook County, IL, tax collector’s website. Chicago is located in Cook County.
The United States has two basic kinds auctions for tax sale properties, also called tax defaulted property auctions.
Every state has its own laws and you have to know the law in that state. Every county has different rules so you must know those rules as well.
Tax Sale Properties at a Tax Deed Auction
It explains tax deed auctions as “A public auction, mandated by state statute, of tax-defaulted real property. Tax deeds are sold to the highest bidder. Typically, bidding begins at the amount of delinquent taxes, interest charges and related fees due to a County.”
When the individual sale is completed and the paperwork is filed, the person who bought the tax deed at the auction owns the property. Bid 4 Assets explains a tax deed as, “A written document used to convey title to real property after property is sold at public auction by a local governmental authority for nonpayment of taxes.”
In other words, in a tax deed auction, you buy tax sale properties. If you are interested in owning tax sale properties to make big profits, this auction is for you.
Once you buy the property you can sell it for a profit, rent it or use it yourself.
This article on my website gives you more detail about tax deed auctions.
Tax Lien Auction
A tax lien auction is the second basic tax defaulted property auction type. In this auction, you buy the right to collect the past due taxes. More than 95 percent of tax liens are redeemed.
Illinois allows 18 percent interest in only six months (36% annually). The interest you can earn varies by state.
The respected legal information website Nolo has an article discussing tax defaulted property auctions. It describes tax lien auctions.
“A tax lien certificate sale, on the other hand, does not convey ownership of the property. Rather, the taxing authority sells its lien and the purchaser receives a tax lien certificate. This entitles the purchaser to basically take over the position of the taxing authority and collect full payment of the past-due taxes, plus interest, from the delinquent taxpayer.”
The same Nolo article describes the redemption process as how “you to get your home back. To redeem, you must reimburse the purchaser the amount paid at the sale (or pay the taxes owed), plus interest within a certain time frame (called a redemption period), which is generally between one to three years. (Sometimes, the redemption period takes place before the sale. If you pay the delinquent taxes before the start of the sale, the sale will not take place.)”
Some states offer “hybrid auctions.” They have some of the tax deed rules and some of the tax lien rules.
This is just another example of why you need to know the rules. You have to know what kind of auction each state has. Then, you have to know the auction rules for each county.
Texas has redeemable tax deeds. In Texas the tax defaulted property auction sells the property.
The owner, the person who owed the unpaid taxes, can still redeem it and retain possession of the property by paying you for the past due taxes and penalties during the period of redemption.
Once the redemption period has expired the tax deed buyer can get possession of the property.
“The deed vests good and perfect title in the purchaser or the purchaser’s assigns to the interest owned by the defendant in the property subject to the foreclosure, including the defendant’s right to the use and possession of the property, subject only to the defendant’s right of redemption,” says Texas state law.
You cannot sell or otherwise use the property until the redemption period is over and you go through a foreclosure process to get legal possession of the property.
You can get a complete list of tax deed, tax lien and hybrid auction states at my website Members.TedThomas.com. Janice Knetzer talks about the profits she made and how this kind of investing changed her life in this video:
Why Do Tax Defaulted Property Auctions Happen?
Tax defaulted property auctions are held because the county needs to collect the past due taxes. “Foreclosure is the final remedy to collect delinquent property taxes,” says the Travis County, TX, tax office
Counties rely on property taxes to fund local services. Property taxes support schools, law enforcement, ambulance services, road construction and maintenance and much more.
Every state has laws allowing counties to sell tax sale properties to collect past due taxes. Every county has different rules.
If the counties do not collect these taxes, the services won’t be funded.
Property taxes, and the effort to collect them by selling tax sale properties, is so important the US Supreme Court has upheld this several times. The most recent decision is Jones v. Flowers.
“If you don’t pay the property taxes on your home, the state or county taxing authority could sell your home in a tax sale. The procedures for a tax sale, including the notice you’ll get, how your home is sold, and how long you can remain in your home afterwards, depends on state law“ says another Nolo article.
Even the US Department of Justice supports the idea. “Because a number of federal agencies have the ability to seize property in certain situations upon giving adequate notice, the United States has a substantial interest in the question presented,” says the Justice Department’s supporting argument in the Jones v. Flowers case.
Finding the Auctions
Tax defaulted property auctions are held every week in some part of the United States. Pick a state to invest in. Then pick a county.
Call or search on the internet for that county’s tax collector office and find out when the next auction is scheduled. If they don’t have an auction planned, go to another county.
When you find a county with an auction planned, your homework starts. You have to get a list of the tax sale properties and investigate them. You must know if the property is worth your investment.
Investing in tax sale properties is an excellent way to make profits if you know the rules and do your homework.
You can invest in tax liens, a passive investment that can earn you incredibly high rates of interest. Or you can invest in tax deeds, which enables you to acquire tax sale properties for pennies on the dollar to earn massive income.
About half the states sell tax lien certificates and the other half sell tax deeds. There are also states that are “hybrids,” like Texas, which sells redeemable tax deeds.
There’s something for everyone, depending on your investment needs, and there’s no shortage of properties available.
Now, with an increasing number of auctions going online, this has even become a business you can do at home.
Let me help you learn more about liens and deeds. I’ll make it easy by giving you access to the Safe Haven Investor System for free. It’s valued at $197, but by using the promo code GIFT with this link, you can get it at no cost: https://tedthomas.com/safehaven
My website, Members.TedThomas.com, has everything you need to know to make big profits in this kind of investing. I teach you how to investigate tax sale properties, find auctions and what to do with the properties.
Ted Thomas is a Florida-based author and publisher who specializes in tax defaulted properties. Visitors to his website will find 3 must see FREE instructional videos. No credit card required.
The video lessons will give you everything you ever wanted to learn about government tax defaulted real estate which is sold at public auctions for 10 cents to 20 cents on the dollar.
You’ll also learn the secrets of tax lien certificates which pay guaranteed returns of 16%, 18%, up to 36%.
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