The Reason Most Never Buy a Tax Lien or Deed: Due Diligence

Tax Lien and Tax Deed Due Diligence

When I first started my research into buying tax deeds and tax liens; I found numerous resources that could teach me about the different ways to make money in this area. Some were very valuable and others were not. After about a month I felt I had enough knowledge in the area and I set out to gather the data on an upcoming auction.

My background; I am a tech geek somewhat, and I have developed systems for the mortgage industry that help streamline a process. Several years ago, I built a system that would extract current status of real estate taxes, and provide a paid and/or delinquent status to lenders nationwide. While I was doing this I was amazed at the number of liens, and deeds that were going to auction. Billions of dollars were on the table each year. This is what led me to begin my research into finding a better way to purchase liens and deeds nationwide.

I first had to locate an auction in my area. If I was going to research a property and bid in person I did not want to travel too far. I found that in some areas the auctions were held annually, and in my particular area the next auction would not be held for several months. This extra time allowed me to research the process even more, and begin to develop a system that would save me time and in turn money.

I started with a simple database and through my other systems that I had previously developed I was able to find the auction, gather the information (typically only a Parcel number and minimum bid amount), and then add to the data provided by the county.

This is where I could see a huge benefit. Here are the steps in the process for a typical person looking to buy a tax lien or tax deed.

Locate the County and determine the date of the next auction (not that easy).

Within the county website locate the list of properties that will be included in the upcoming auction. These are represented by a parcel number, sometimes called an APN (again not as easy as it sounds).

Extract this data and move it into an excel spreadsheet.

Go back to the County Assessor's office and using the Parcel Number, extract the value and any other information that may help in determining what type of property it is. Hopefully you are able to determine if it is a land parcel, a condo, a single family home, etc., but as I learned very quickly this is not always the case.

This process, even after I have been doing it for sometime will require 5 to 10 minutes per parcel.

This is where I think the majority of potential investors stop.

If it takes 5 minutes per parcel number to gather the needed data to begin researching a particular property, and you must do this on all of the parcels in any given auction, the investor simply runs out of time and patience.

For example:

If each parcel takes 5 minutes to copy and paste the data into excel (it could easily take more time than 5 minutes).

A typical auction could contain 400 properties in only one auction

5 minutes x 400 = 2000 minutes

2000 minutes divided by 60 (number of minutes in an hour) = 33 hours

This is 33 hours total that you would spend just getting the data into an excel spreadsheet

Let's say you can devote 4 hours a day to this process (late at night), because let's face it most of us have a job too

That is 33 hours total, divided by 4 hours per day = 8 days to just extract the data

Now add in another County that is holding an auction around the same time, and you either double the work or lose the opportunity

I've been at this now for a few years specifically focused on real estate auctions of all types and have the solution that I would like to share with some professionals for feedback. It's not just the data but a platform pulling together everything I think is needed in due diligence but as I said I have been at this for a few years and some have been buying at Tax Auction's for 20 years, that's who I want to talk to.