Tax defaulted property auctions

[Natalie Johnstone]

Hi! Has anyone here purchased from a tax defaulted property auction (in CA specifically, but open to hear about other areas)?  would love to hear your experience, how competitive it was, etc?  Also what your exit strategy plan was?

Thanks!!

[Jay Hinrichs]

Quote from @Dan H.:

Quote from @Natalie Johnstone:

@Dan H. THanks Dan! Always good to hear the good bad and the ugly.  I we really are only looking at 2 properties.  We know the area very well.  Will keep you posted.   Can I ask, do you recall how high bids went over opening and how competitive it was? sounds like it was pretty competitive..

My bet is both those will be redeemed prior to auction. We have only bid on 2. One went for over what I expect a wholesaler would have sold. I do not remember the numbers but this property obviously needed full rehab. I suspect someone with cheaper rehab costs than mine purchased it with thinner margins than i seek. The other we were striving for 70% of ARV. It was maintained on outside but a fair amount of junk. ARV (maybe in 2018 - it would be much higher today) was ~$600k so we wanted $420k. It went for nearly $100k over our price. My belief is purchaser had more info on inside condition than I had or was buying to OO. There is no way I could pay close to that amount with risk on needing a full interior rehab.

My estimate is that maybe 1 out of 10 “normal” properties are not redeemed.  If you only have 2 candidates the odds of having one complete the auction is small.  

Between late redemptions and insiders, it is a tough purchase.   In addition, exerting time and effort on properties that are not for sale is not worth it to me. 

However, I am curious if your experience is different.  

Good luck

in my experience in Ca very few actual homes go to auction unlike other states were many go to auction.. Agreed most all redeem last minute and you wasted all that time .. I would NEVER pay for a title report on a property because 98% chance it wont go .. Also Ca tax sales wipe EVERYTHING out the only reason for a pre lim would be a access issue.. which of course one can do on their own.. But for judgements liens and all that who cares they are snuffed out at the sale. The big play for tax sale in CA is bare land in the high deserts and in the areas that have a lot of old recreational communities were lots never got built on.

In addition once it went to bid 4 assets the stupid money comes in and well it just aint no fun anymore.. Our company used to buy 100 plus parcels a year in N. Ca at tax sale. but you have to sift through 2 to 3 thousand to get those.. And you have to really know the market and area we did not have the time to drive everything you just had to already have knowledge of the area and what the parcels looked like etc..

So I guess its just needle in a  haystack these days and frankly at least for us there is better use of our time.