Tax Sale/Foreclosure Occupants Best Practices

[Steve Wilson]

Hi Everyone,

I've been buying at PA tax sales for a couple years, Upset (liens included) and Judicial (liens divested), and understand the research needed ahead of time to protect myself from a bad deal. I have not purchased any occupied properties because the risks involved seem too high. I haven't participated in foreclosure sales but my understanding is that the same issues with occupants apply. What are peoples best practices to manage the risks involved with occupants? Most advice I've heard is just to approach them after the sale, which in my mind is too late.

Do you research them ahead of time on Facebook or other social media?

Do you search criminal records for them?

Do you go knock on the door pre-sale while driving around doing your property inspections? Talk to neighbors during property inspections?

If you do research ahead of time, what are some red flags that would cause you to back out of a deal or add a couple thousand to the deal cost for legal battles/ cash for keys?

If the occupant is the owner-

What is the going rate for cash for keys? Let's say it's a suburban home in a decent to nice neighborhood, ARV $300-$500k.

Do you make signing a quit claim deed a part of your cash for keys agreement?

In general it sounds like "help me help you" is the best approach, what else has worked for people as far as things to offer? Moving van, etc.

If the occupant is a tenant-

You are not allowed to start charging rent until you have the deed correct? What do you do in the time between the sale and when you get the deed?

Thanks!

[Fernando Alonso]

Hi Steve, 

Let me clarify first that I am deeply involved in the foreclosure market in Florida. I don’t have legal experience in PA, so my answers will just be common sense from an investor’s point of view.

If you’ve got unlimited time, yes, you can dig deep on every property, even researching occupants. But in reality, many scheduled sales get canceled and many others are bid up and lost, so you’d spend a lot of time on properties you’ll never own.

My approach is to focus research on the big issues that can seriously affect your investment, liens, bankruptcies, complicated title matters, or red flags that could blow up the deal. Occupant details can be looked at later if you actually win the bid, but I wouldn’t sink heavy time into that before auction unless it’s a very high-value target property.

Do you research them ahead of time on Facebook or other social media?

There is not much crucial information you will obtain in social media. They will never post the equity in their mortgage, their signed contracts or their low salary on Facebook or Instagram.

Do you search criminal records for them?

Yes, checking criminal records can add useful context. It gives you an idea of what kind of person you may be dealing with and whether they’re under financial or personal stress. Criminal cases are costly (between attorneys, bail, and job difficulties) and that can affect how someone responds if you take over the property.

Do you go knock on the door pre-sale while driving around doing your property inspections? Talk to neighbors during property inspections?

If your plan is pre-foreclosure, then yes, knocking on the door or talking to neighbors makes sense. But if you’re aiming to buy at auction, the strategy should be very different: stay completely quiet. Don’t make noise, don’t trigger alarms. Sometimes owners don’t even realize the auction is coming, and your presence can push them to act, cancel the sale, file bankruptcy, or get a lawyer to delay the process for years. Even if you win, they could later present challenges or claim harassment or abuse just to stall the title issuance and later eviction. My rule: never show up until you hold the court-issued title.

If you do research ahead of time, what are some red flags that would cause you to back out of a deal or add a couple thousand to the deal cost for legal battles/ cash for keys?

When I research ahead of time, the first thing I look at is the type of defendant. Some are passive and let the process play out, but others are very active, filing claims, motions, and requests to delay the case. Red flags also include situations with multiple owners fighting each other like heirs, divorces, business partners, or messy subleasing. Those can drag on and be hard to settle.

Another sign is the age of the foreclosure. If the case has been open for years with lots of filings, that’s a major warning, I’d walk away.

As for cash for keys, it works best when occupants have some cushion, enough to rent elsewhere or move in with family. If they have nowhere to go, paying them rarely solves the problem. On the other hand, when they hire lawyers, remember those require upfront retainers. That usually means they can’t afford to fight forever, and even their attorneys know they’ll need to wrap it up quickly.

What is the going rate for cash for keys? Let's say it's a suburban home in a decent to nice neighborhood, ARV $300-$500k.

It really depends more on the occupants’ situation than on the value of the house or the neighborhood. If they’re desperate to move and just need a little help with first month’s rent or a deposit, a smaller offer can work. If they have legal tools to fight or seem ready to drag things out, the “price” of cash for keys goes up. I’ve seen it range from a few hundred dollars to several thousand, depending on how much leverage they have and how much time and hassle you want to avoid.

Do you make signing a quit claim deed a part of your cash for keys agreement?

No, I don’t make a quit claim deed part of cash for keys. There’s no need for it, once you’ve won the foreclosure/Tax deed auction and the clerk issues the title, you already own the property. A quit claim deed from the former owner adds nothing of real value. Cash for keys is just about getting possession peacefully, not about transferring title.

In general it sounds like "help me help you" is the best approach, what else has worked for people as far as things to offer? Moving van, etc.

Yes, the “help me help you” approach is usually the most effective mindset with cash for keys. People respond better when they feel you’re giving them a hand instead of pushing them out. Besides money, some practical options can make a big difference. Offering to cover moving expenses, paying for a moving van, or even arranging short-term storage can ease a lot of the stress. Sometimes just helping them with logistics is more valuable than adding a few hundred dollars.

One thing I would never recommend, though, is signing a lease agreement with the former owner. That’s a trap. The moment you lease it back to them, they gain tenancy rights. If they don’t pay, you have to start an entirely new eviction process, which resets the clock and delays everything. And realistically, if they couldn’t keep up with mortgage or taxes to save their home, chances are they won’t have the money to pay you rent either. It’s far better to give them a clean exit with cash for keys than to get stuck in a landlord-tenant situation with someone who already has financial problems.

You are not allowed to start charging rent until you have the deed correct? What do you do in the time between the sale and when you get the deed?

You’re correct, you can’t just start charging rent right after the auction. Until the clerk issues the deed, you don’t officially own the property. And even once you do, if there’s a legitimate lease in place, that lease has to be respected. The smart move is to ask the tenant for a copy of the lease so you know the exact terms. As I told you before. If you don't have the title in hand, be invisible. Don't show up. Your presence may trigger the owner attention and delay the title in court.

Trying to evict a legal tenant with valid tenancy rights can be complicated and very lengthy, so it’s usually better to honor the lease and collect rent until it runs out. Most tenants will actually cooperate in this situation because the foreclosure wasn’t their fault, and they’re already stressed about possibly losing their home. If you step in as the new owner and respect their lease, they tend to feel relieved and will work with you, rather than against you.

Hope it helps!!