San Francisco, CA Tax Auction. Has anyone here been through the process?

4 Replies

I am an Investor in Denver Colorado. Looking online a few weeks ago I saw that there will be a Tax deed auction starting today in San Francisco. I was wondering if anyone here had been through the process and could tell me the things to watch out for. There are almost 400 properties up for auction, 90% of them are Time Shares. There are a few condos, multifamily, SFH's that I was more interested in. As An exercise I tried to to some due diligence and Title research on Property Radar From where I live in Denver. I was hoping to talk with someone who has been through the process of buying/bidding at a Tax auction as opposed to a Public Trustee auction. If you have any wisdom on the subject Id love to hear it.

Thanks in Advance

I've bid at the tax deed auction in Sacramento, but not in San Francisco.  The laws are the same throughout the state, though the rules on how the auctions are carried out can (and do) vary by county.  For instance, in Sacramento the auction/bidding is done in person, on one designated day, and the property must be paid for in full immediately after that property is bought (they won't even start auctioning the next property until you pay for the one you just bought).  On the other hand, in San Francisco the auction is done entirely online, over a several day period, and they give you up to 72 hours after the auction to submit your payment. 

With that being said, some things to watch out for would be:

- Know what liens/encumbrances are eliminated by the tax sale and (more importantly) which ones are  not. (This info is usually posted on the county's website.)

- Know what condition the home is in.  For that matter, make sure there is even a home on the property.  All of the properties are sold completely "as is", so buyer beware.  (You need to physically drive by the property to see what it looks like in person.  You often can't see inside a property, though sometimes you can.  But you can learn a lot just by looking at the home from the exterior, talking to the neighbors, etc.)

- Know that any code violations and/or contaminated properties are still going to be in violation and/or contaminated after the sale.

- Know that anyone living in the property at the time of the sale is likely going to still be living there after the sale, so it'll be your responsibility (and expense) to get them out.

- Know that it is possible to have a tax sale later ruled invalid (usually because an interested party claims/proves they weren't properly notified of the sale).  If this happens, you will be refunded the purchase price but not for any improvements you did during the time you owned it. 

- Know that there is a one year statute of limitations to bring an action to overturn a tax sale, and title companies may not issue title insurance until after this period of time has expired.  This can be especially important if your goal is to turn around and immediately try to sell the property, since a prospective buyer won't be able to obtain lender funds without title insurance.  (There are ways to obtain clear title - like hiring a lawyer to bring a quiet title action or going though a company called Tax Title Services - but you just need to account for that extra time/expense so you're not caught off guard.)

- Know what the property is zone for and whether it is appropriately zoned for what you intend to use it for.  (Counties auction everything from bare land to properties zone residential and commercial.)

Others may be able to offer you other suggestions/words of advice.  These are just the things I could think of off the top of my head.  Good luck.

Originally posted by @Kyle J. :

- Know that there is a one year statute of limitations to bring an action to overturn a tax sale, and title companies may not issue title insurance until after this period of time has expired.  This can be especially important if your goal is to turn around and immediately try to sell the property, since a prospective buyer won't be able to obtain lender funds without title insurance.  (There are ways to obtain clear title - like hiring a lawyer to bring a quiet title action or going though a company called Tax Title Services - but you just need to account for that extra time/expense so you're not caught off guard.)

Great info, @Kyle J. Would you say that essentially means tax sale properties are not an option for an investor who would intend to flip the house?

Thanks @kyle 

@Kyle J.  and @Nick Munsee , I have had someone drive by the properties so I'm covered for that. A few are occupied but being that I would have a year to evict or cash for keys to get the tenants out I'm not worried.

My biggest concern is getting clean title. the statutes say that the tax sale wipes out most liens even HOA liens. But the sale will not wipe the special assessments, IRS liens (120 Redemption) and other citations and code violations. I checked title and a few of the properties had $200-1000 dollar liens for past due garbage and water bills. Many off which are added to the tax bill after a period of time.

Some of the margins are potentially still pretty big considering that San Francisco has some of the highest property values in the country. Ill be curious to see what other investors are willing to bid on these properties. I may just lay low and let this one pass but it has definitely peaked my interest.

Hi Kevin,

One key item that I'd add to what Kyle said. Certain non-profits have first dibs on these properties, and a lot of investors pre-work the list trying to buy them before the sale. As such the tax sale lists tend to dwindle quickly as the sale approaches.

Best,

Sean

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