Here’s an introduction to tax defaulted property auctions, and the topics I’m going to cover are:
- How Counties Collect Delinquent Property Taxes
- How Often Counties Hold Tax Sales
- It’s Essential to Know the County Auction Rules
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How Counties Collect Delinquent Property Taxes
To answer the question: “What is a tax defaulted property auction?” First, it is helpful to know why these auctions are held. Local governments (county, city, township, town, parish) receive the majority of their funding from property taxes.
If those taxes are unpaid for an extended time the local governments must take action to collect delinquent taxes, one method is to make a demand for payment and if that payment is not forthcoming the government sells the property to the highest bidder at the auction, in about half the states; the other half sell tax lien certificates.
Simply put, a tax defaulted property auction is an auction by the local government to collect delinquent property taxes.
How Often Counties Hold Tax Sales
Tax defaulted property auctions are held by local governments throughout the year, as often as once a month in some local counties. You can find the next auction on the county’s website, by contacting the county tax office or by reading the legal notices in local papers. The laws regulating the auction are set by the state legislature and enforced at the local county/municipality government level.
The laws can be different from state to state, and enforcement can vary within a state depending upon the county or municipal rules of the sale.
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It’s Essential to Know the County Auction Rules
There are many common features of a tax defaulted property auction that apply in each individual auction, but the rules can vary, so it is essential that you know the rules of each auction before bidding. Here are some features that are common to most tax defaulted property auctions:
When buying at a tax defaulted property auction, the bidding starts at the amount of back taxes due to the local government, and the price is bid up, as in a conventional auction.
Most liens on a property (mortgage, deed of trust, mechanic’s liens) are removed when the property is sold at a tax defaulted property auction; only government liens typically remain.
After an auction, a few states have a period of redemption (one year or less), where the delinquent taxpayer has one last chance to pay the taxes and restore their full ownership rights to the property before the tax deed buyer can take possession of the property.
Most states have no period of redemption, meaning as soon as the tax deed you’ve purchased is paid for with the local government, you own the property free and clear for the price you paid at the auction.
One useful piece of advice is to do your homework before you purchase. A useful tool to do this is the website Zillow.
Conclusion
What is a tax defaulted property auction? Counties collect unpaid property taxes by selling tax delinquent real estate to the highest bidder at auctions where properties can be purchased mortgage-free for astounding discounts.
Ted Thomas has guided thousands of tax deed investors, teaching them the process of tax defaulted property auctions and how to understand the techniques used by many successful tax deed investors to find the most profitable properties.
Find out more here: What is a tax lien and how do they work?
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Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.
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