Buying at a tax auction

5 Replies

Hey everyone.  I know the rules could potentially differ in each state but I'm hoping someone with some auction experience can answer a question for me.

When Purchasing a property at auction with tax liens, are you responsible for paying the unpaid taxes, or does the sale price cover the liens?

You're correct that it varies by state, but if you were to purchase a property at a tax deed auction in California, all of the back taxes would be paid from the proceeds of the sale.  In fact, the starting bid wouldn't be less than what was owed in back taxes.

Thank you! @Kyle J.  I’m in Philadelphia.  Since it is becoming a very expensive market, I think an auction purchased property would be a good place for me to start. 

Yes, check your state laws and processes. I purchased a SFR this way in CA a few years back and.....well let just say that I can laugh about it now. Its a good investment now. Time can forgiving in real estate right?

All of the standard disclosures and warnings apply! Study the process inside and out and once you have done all your due diligence, do some more. Your working with cash, not going through escrow/title, most likely can not get inside the property for inspections or appraisals. Any mistakes or assumptions can be costly. 

Some of the bigger items that I can suggest to look into/keep in mind when researching your state and county; 

-Research your title. Although tax liens are superior, some other claims may still have standing

-See how marketable your title/deed is after you win

-Do whatever you can (within the law) to see the inside of the property. Talking to the neighbors can be insightful. 

-After the homework, I'm sure you can find some BP specialists to clarify some of the finer points.

Happy Hunting!

@Brandon G. thank you for the insight.  I didn’t even think about the other potential leans.  Do you typically have an opportunity to do a title search before fully purchasing the property?

Yes, you can and should do your own title search whenever you want. IRS and Weed liens are going to be your biggest risks most likely. The county will be happy to tell you about their weed lien, but don't expect any other help if its anything like CA. They are not allowed to give "legal" advice and have a canned disclosure/statement usually. Once again, lots of homework for your specific location. And again, really check out that property! I once saw some one pay big for a property that had a negative value (complete tear down, value in lot only).