Harris County Tax Auction
1.0 Introduction
Here is my small experience with a Harris County Tax Sale. Harris County is the county containing Houston, Texas. Since I could not find much about the actual process I figured others might find some benefit in this. I do not know much so please do not rely on this; verify as needed.
2.0 Preparation
The tax sales are published monthly like twenty or so days before the sale. They are physically posted on a bulletin board but also published in a paper called Daily Court Review. The lawyers that handle the foreclosures also post the property list on their websites. Publicans.com seems to be the lawyers that handle most of the cases and they have an easy to download list but there are a few other foreclosures that other lawyers handle which will not be on the publicans website.
I verified the locations, values, and rents of the properties I was interested in, visited them in person.
3.0 Pre-Auction
The auction is held once a month at 1110 Congress, Houston , Tx. Registration starts at 8:30 am and bidding starts at 10:00 promptly.
When you arrive there is a registration tent in the plaza adjacent to the building southwest of the building. There were four lines with signs for new bidders and "will call." The signs were not clear so the furthest left line the New Bidders line was long but the second to the left line for new bidders was short.
If you are wanting to bid on properties in different precincts being a trusted friend to bid for you and upon registration just instruct them he is registering "for benefit of" (f.b.o.) you. It is difficult to follow multiple precincts' auctions.
The auctions are divided by the constable precinct where the property is. There are four auctions going on inside the building and five outside the building under the awning along with an auction.com tent. There is a diagram of the auction location at the registration tent describing where each precinct will be auctioning at.
Behind each auctioneer is a sign stating his precinct. There is also a list of case numbers representing the properties up for auction. Many of these auctions were cancelled or delayed as was noted on that large list.
4.0 Auction
Bidding was madness.
The auctioneers seemed to be unprofessional (but I would not be experienced enough to properly judge.) They were constables who seemed to be doing this because it was part of being a constable but they were terrible auctioneers. They were not loud enough, barley raising their voice in such a noisy room. As a consequence the bidders crowded as close to the auctioneer as possible. People were shoving and pushing against each other in a most unpleasant way, butt-cheek to butt-cheek. It was crowded, hot, and sweaty. The people who got their early, near the front of the crowd, were in a better position. There were no chairs; everyone stood. After the first auctioneer had gotten too hoarse another auctioneer took over. It seemed she didn't know the proper rules for incrementing bids and as a consequence left money on the table. (But my knowledge of auctioning rules is only through experience, I've never read the procedures.)
The bidding goes by property sequentially by case number. The case number is listed on the property auction lists you should have acquired in your research. It also goes sequentially by auction number (the number in parenthesis next to the auction date on the listings.) The auctioneer has a list of case numbers representing the properties posted behind him, mentioned above. When you arrive check this updated list to ensure the properties you are interested in are still available and have not been reclaimed, cancelled, or postponed by bankruptcy. As the auction progresses an attendant will mark off the sold properties. The auction started with the resales before the sales. None of the resales were canceled but the majority of the sales were.
The auctioneer starts by calling the case number, property description, address, and hcad number, estimated value and minimum bid. He then solicits minimum bids. People bid by holding up numbers they received in registration. These numbers are recorded as the auction proceeds. The auctioneer increased in increments of $10k, $5k, $1k, $500, or $100 depending on the property unless somebody called a higher bid. Those who held up their placard on the minimum bid were incremented automatically but it didn't matter because if there were multiple bidders it always went higher. Gratefully the auctioneer wasn't a professional and didn't use filler words or egged on bidders. The auctioning would be concluded with the auctioneer saying, "Going once for $X. Going twice. Sold for $X."
After winning the bid the buyer must immediately proceed to a table near the auctioneer and pay. If immediate payment is not available the property will be offered to the runner up bidder. The winner must pay by cash or certified check (which I assumed was a cashiers check) made out to yourself which you would endorse in front of the cashiers. I was told any amount you pay over would be refunded by a check in the mail. If you win a property you also need to present a document stating you are current in your property taxes which you can obtain from a nearby building after paying the constables (or secure it beforehand) called a "Written Statement of Taxes."
The auctioning continues until all the properties are sold or struck off due to not meeting minimum bid.
The crowd dissolved quickly after the resales were over and dissipated during the sales as there were fewer properties which bidders were interested in.
5.0 Commentary
As I understand it the money received from the bidding goes to the taxing districts minus constable auctioning costs in proportion to taxes owed up to amount owed. Any amount over owed taxes must be remitted to the original property owners or heirs. That seems pretty fair.
There were several classes of investors: novices, people interested in a single property, flippers, knowledgable speculators, wholesellers, hobbyists, and professionals.
Talk to all the experienced people you can. The accumulated years of experience in the building is only dwarfed by the years of inexperience. There was so much knowledge there!
According to the people who seemed experienced the new bidders were bidding up the property prices to unsustainable levels.
Do your research before you get there. Some people were looking up properties they were bidding on on their cells as they were bidding! Also not all liens are released at a foreclosure sale. A title search should be conducted. You should check the court documents to ensure all local taxes were and taxing district liens were removed. It seemed that if it said "Harris County et al" in the case description that happened but it is easy to verify and view the documents on the county district court's website.
I'm pretty sure some bidders were bidding on a landlocked 5' ditch easement between two other properties. Good luck doing anything with that.
Know the back taxes due. Many novices were buying property were not aware that the resales were accumulating taxes every month the county held it. They ended up paying way over retail for many worthless lots after taking accumulated taxes into account.
People clearly had print outs and maps of the wrong property! Google maps was especially inaccurate with 0 Street Name Rd. addresses. All locations should be verified with the tax appraisal district's website.
Also many people had their max bids written next to the property addresses. Often the bidders were smashed right next to each other. If someone spiteful wanted to run the price up to the max that would be trivial. Keep your max bid in your head.
Also wear a money belt or keep your cashier checks in a folder or somewhere a pick pocket can not access. Keep your wallet secure. Even with all the constables around it would have been a thief's dream, especially if you are assuming some novices had brought thousands in cash. Bring cashiers checks in multiple amounts as very few people got the properties at the minimum bid.
It is not a place I would feel comfortable carrying a lot of cash since there are so many bums around.
I don't think you can concealed carry their either because it is a courthouse so civilians are particularly defenseless on their way walking to and from there to parking. There are a lot of constables there so I wasn't that worried about common city violence once at the courthouse. Gratefully there was none of the goofy metal detectors or security theater nonsense. It was an open plaza and a large open room with several exits.
Check the laws on redeemable period if you intend to resale. Check with your title company about how long until you can secure title insurance as it may vary from six months, two years, or four years.
Know the laws about right of redemption and repairs vs improvements. You don't want to dump money fixing up a place to have the former owner taking it from you with all the improvements.
Visually inspect the properties in person. Novices were paying close to retail for what would have been its price based on square footage but many of the properties were in a serious state if disrepair and nowhere near its book value. Think wiring ripped out, AC stolen, foundation crumbling, etc.
You will not get rich. You may get a property at a discount but you will not get it at single digit percentages. If a lot is appraised at $10k do you really think you will get it at its minimum bid of $1,000? There were teams of professionals with laptops and folders who were coordinated and knew what they were doing. Do you think you are going to best them?
HCAD appraisals are notoriously inaccurate. Verify value for yourself.
A lot of people were way overpaying for worthless properties.
7.0 Advice
- Arrive early.
- Have the money you bid.
- Use cashier's checks rather than cash.
- Check the city maps beforehand for utilities, road access, obvious easements, flood zones, and restrictions.
- Verify the location and value of the property
- Verify the property restrictions and liens
- Take the bus or carpool as parking is expensive.
- Don't expect to win a minimum bid on resale properties.
- Talk to people.
- Know your max bid up front.
- Don't get caught in the emotion.
- Watch out for your safety.
Edit: Included introduction to include where Harris County is.