How Does a Tax Sale Work?
What is a tax deed sale? You might have questions about a tax deed sale if you’re new to the tax lien world.
What is a tax deed property, and why would you want to purchase one? What is a tax deeds sale, and how does it work? Where can you find tax deed property for sale?
Ted Thomas has been in the tax lien business for over 30 years. He is America’s Tax Lien Certificate & Tax Deed Authority, and today he will answer those questions and explain the benefits of purchasing tax deed properties.
You may watch the video above, or if you prefer, read the transcript below.
Tax Deed Sale Explained
In the context of real estate, a tax deed is a legal document that grants the ownership of a property to a government body if the owner fails to pay property taxes. A tax deed gives a government agency the authority to sell a property to collect delinquent taxes.
Unlike in a tax lien state, where the property owner may remain on the property and receive more time to pay the delinquent property taxes, in a tax deed state, the tax defaulted property is seized and the owner evicted.
What Is a Tax Deed Auction?
What is a tax deed sale? Tax deed sales are usually held at public auctions.
The property itself is sold in a tax deed auction with a minimum bid equal to the amount of back taxes owed plus interest and any other costs involved with selling the property. The highest bidder wins. Once the property is sold, it is then passed to the buyer.
Tax deed auctions are held both online and offline. Auction announcements and lists of tax delinquent properties for sale can be found on county websites and published in local newspapers. Anyone can attend the auction.
The frequency of auctions depends on the county. For example, some counties will hold auctions monthly while others may hold auctions annually.
The larger that the population of the county is, the more properties you can expect to see for sale. Los Angeles is one example of a county with a large population where you could find thousands of properties for sale at their annual tax deed auction. However, competition may be greater at the larger auctions as well.
Can You Make Money on Tax Deeds?
Why would you want to purchase a tax deed property? Since the bidding begins at an amount close to the unpaid property taxes, it’s not uncommon to acquire properties for discounts of 60%, 70%, 80% or even more at a tax deed sale.
Traditional real estate investors must wait many years for a property to appreciate in value. Conversely, tax deed real estate can have a large profit margin available immediately, and tax deed properties are also sold without a mortgage.
So you are the winner of the bid – now what?
How do you think you could benefit from investing in mortgage-free real estate for pennies on the dollar? How much would such a large profit margin mitigate your risk and facilitate reselling the property to generate cash flow quickly? No doubt you can see the possibilities.
Learn More About Tax Deed Investing and Ted Thomas
What is a tax deed sale? In conclusion, a tax deed sale is a local auction where the county will sell tax defaulted property with the bidding beginning near the amount of the delinquent property taxes.
At a tax deed sale you are actually buying the property.
You can acquire real estate for phenomenal bargains at a tax sale, and you receive the property mortgage-free.
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Please browse our website for more information about this fantastic investment opportunity and take advantage of our library of educational videos to start investing today!
Read the Video Transcript – What Is a Tax Deed Sale?
Randy: Ever wondered what is a tax deed sale? You’re not alone because I’m wondering the same thing. I’m not really sure myself, but fortunately, we’re here with Ted Thomas. Who is the tax lien certificate and tax auction authority. He knows about these things. Ted good to talk to you. And what is a tax deed sale? Can you explain to us?
Ted: Okay, so the United States has 3000 counties. All 3000 counties have a mandated tax on the property. Now every property that’s owned by an individual has a tax on them. So in half of the states, they sell tax lien certificates. Now those are very benevolent states. They don’t push the people out. They just wait to get their tax. 98% of the people pay the tax.
Ted (cont’d): The other half of the states are not so benevolent. California, New York, Texas. They’re not benevolent. They’re going to say, you have to pay your tax. That if you don’t pay your tax on your property, we’re going to confiscate. We’re going to seize your property. We’re going to take it away from you. So think about the repo man. Repo man, come pick up a car.
Ted: Well they can’t pick up a house. So they call it a seizure. They call it confiscation. Alright, so you’re going to lose the house. And you’re going to lose it to the county. This has got nothing to do with banks. This is the county. Okay. The county said, well, wait a minute you didn’t pay the tax. So we’re going to take your house away.
Ted (cont’d): What’s the county going to do with the house? They don’t want that house. They’ve got enough property now. They own the office buildings. They own the roads. They own the parks. They own the schools. They don’t want the property. So what the county does, is they say, we’re going to have a tax defaulted auction.
Ted (cont’d): Now you’re going to be amazed what’s going to happen now. So now they’re going to sell these properties. They’re going to gather them all together. The ones they take in. Now in a large population county there would be a lot. In a small population county there would just be a few. All right. So now they’re going to sell those properties.
Ted (cont’d): Now you’re not going to believe this, but this is what happens. The county wants to get rid of the property. They just want to get rid of it. So they discount it 60%, 70%, 80%. So whatever its value was, they discount it 60%, 70%, 80%. All right, anybody can go to this auction. You, I, anybody, it just takes money.
Ted (cont’d): So now you’re going to buy property for 10 cents, 20 cents 30 cents on the dollar. So that’s a tax defaulted auction. That will happen in every county in the United States this year. There will be at least 3000 counties that do that. There are probably 5,000 auctions every single year. And the rest of the world doesn’t even know what I’m talking about.
Randy: Hey, I’m curious, Ted, how often are the auctions? And does it vary state by state every week, every month, once a year?
Ted: Every county’s authorized to do it at least once a year. We’ll have states like Georgia. They have 169 counties. There will be 169 auctions every month. Places like Texas. They have 254 counties. 254 auctions every single month. You get a place like Florida, they do it once a month. Get a place that’s got a lot of properties. They’ll do it. They can do it whenever they want.
Ted (cont’d): The county just makes up their mind. And then they publish on their website that they’re going to sell these properties. You can look at the property before they do it. You can go and see it and you can buy them online.
Randy: Wow. It’s like buying a house perhaps for cheap. And sounds like a pretty neat opportunity. Ted knows a lot about these types of real estate. You’ve been in real estate for like a million years, or something? Do I have that right? A hundred thousand years?
Ted: Yeah. Actually I come from a real estate background. My first career was actually as an airline pilot. But when I retired from that, I got into big real estate. But you have to wait with real estate, you buy it, and you basically have to wait until inflation brings the price up. Well, that’s a long wait in a lot of years.
Ted (cont’d): This is altogether different. Because you’ve got the real estate, it’s got a value, but you’re going to try and buy it for 10 cents, 20 cents, 30 cents on the dollar. Now, if you can buy it for 30 cents on the dollar and there’s no mortgage, all the room between 30 cents and the value is yours. And this has been going on for 200 years. And 99% of the people don’t know what I’m talking about. They say, Ted, that can’t be. I didn’t make the rules. I’m just bringing you the message.
Randy: And it’s a pretty good message. And if you want to hear more about this message, and learn more, I think, head to Ted’s website at tedthomas.com. And you’re going to find some other videos just like this. From really interesting information about some types of ways you can invest in this type of real estate and tax liens. Very interesting stuff. So we’re going to talk some more. Head to the website and we’ll see you there.
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