How do you guys do due diligence before bidding at tax deed / foreclosure auctions?

Question

Hi everyone,

I’ve been spending more time looking at tax deed and foreclosure auctions, and one thing that always worries me is making sure I’m not missing something during due diligence.

Before bidding on a property, I usually try to check as much as possible, such as:

• unpaid property taxes
• liens (IRS, municipal, HOA, utility, etc.)
• code violations
• open permits
• judgments or court records tied to the owner
• potential mortgages that might survive the sale
• city fines or special assessments
• anything else that could become my responsibility after purchase

The challenge is that this process can be pretty time-consuming, especially when every county website is different and information is spread across multiple places.

I’ve seen some investors outsource this to lien search companies or hire people to research properties before auctions, while others seem to do everything themselves.

So I’m curious how other investors here handle it.

A few questions for those of you who regularly buy at auctions:

• What is your standard due diligence checklist before bidding?
• How long does it usually take you to verify everything on a property?
• Do you use any tools or software, or is it mostly manual research?
• Do you ever hire lien search companies, and if so, what do they typically charge per property?
• What are the most common hidden issues you’ve seen people miss before bidding?

I’d love to hear how experienced investors approach this so I can improve my process and avoid expensive mistakes.

Thanks in advance for sharing your workflow.

Don McAlpine · Answer

Your list is fine, but you can probably save yourself some research time.

The auction rules will spell out what liens have been extinguished, and I always call the county to confirm both what is extinguished and what will remain.  Doing so will cut down the number of things you have to look out for.

I use Parcel Fair to dissect the list into what properties I would like to bid on, and it provides links to the county tax records, GIS, owner info, comps and more.  This saves a ton of time.  If municipal liens remain I check in with code enforcement and court records for those.  A property with a long list of liens, even if they are extinguished, will require a longer period of time to clear the title.

IRS liens should be embraced rather than avoided.  The IRS is not in the real estate business and unless the property is high-value, it's highly unlikely they are interested in taking the property.  They have 120 days to decide and if they take the property they will refund what you paid, but more likely you can reach out to them in advance and determine their interest and know how you will proceed.  Properties with IRS liens get fewer bidders.

I once won the bid on a property that had a $130k lien attached from the state for hospice care (the owner was deceased with no relatives).  This apparently scared many bidders off, but the county confirmed to me that the lien was wiped out and only eligible to collect on the overbid amount.  There were two bidders for the property, me and a guy who owned the property behind the subject property.

He eventually dropped out so I approached him after the auction to discuss.  He said he wanted to use the land for parking for the building he owned (it was commercial), and I ended up selling it to him on a seller-finance arrangement.  He provided a hefty down payment and I'm still collecting monthly payments.

Simone Owens · Answer

Don, your IRS play works and I've seen the bidder pool thin exactly like you describe. One thing I'd add from the financing side, since that's where I spent 15 years.

The 120-day window is the risk everyone talks about. It's not the one that gets people. Even when the IRS never exercises, that lien clouds title until it's formally released, and a release isn't automatic when the window closes. It takes a request and it takes time.

That doesn't matter if you're paying cash and holding, which is what you did, and it worked. It matters enormously if your exit is a sale to a retail buyer using FHA or conventional. No lender clears that to close over an unreleased federal lien, and your buyer's underwriter finds it in the title commitment, not before. So you're 45 days into a contract with a buyer who now can't close, and you're chasing a release you should have started the day you took the deed.

So I'd agree with embracing them, with one condition: know your exit before you bid. Cash exit, the discount is real. Financed exit, you're buying a timeline you don't control.

What's your typical hold on those?

Alyssa Marquez · Answer

A checklist is a great start, but I'd also verify occupancy if possible and understand the auction rules for that specific county, since they can vary quite a bit. I usually focus on the property's title history, tax status, liens that survive the sale, code violations, and estimated repair costs. If something can't be verified confidently, I either factor that risk into my bid or pass on the deal.

For higher-value properties, many investors I know use a title or lien search company because it's cheaper than missing a major issue. The biggest mistakes I see are assuming all liens are wiped out, underestimating rehab costs, or overlooking occupancy and eviction challenges. Sometimes the best deal is the one you don't bid on.

Tiago Pereira · Answer

Marcelo, this is the right question to be asking early — and I'll take the data side, since the "every county is different and info is spread across places" part is the real problem, not the checklist.

Quick answers to what you actually asked:

• Time: budget ~2–4 hours per property doing it carefully by hand. Most people research 10–20 per auction and bid on 3–5, so the manual math gets ugly fast once you're active.
• Tools / services: some exist — PropertyOnion pulls auctions + some county data into one place, and title/lien companies (ProTitleUSA, or a local title co.) will run a search for roughly $100–200 a property. Worth it on one you're serious about. Where they fall short is coverage — they don't hit every county, and the data is often a snapshot, not current on sale day.
• Most commonly missed: code enforcement liens. They quietly wreck deals — they attach to the land, survive the tax deed, and often carry daily fines that have been running for years. A house that looks fine can hold tens of thousands in violations, and it's rarely in the title search, so I check the city/county code enforcement portal separately.

The trap doing it all by hand:
A blank result isn't "no lien" — half the time it's "the county site changed or timed out and my search returned nothing," and you don't catch it until after you've bid. That's the exact failure I've spent years engineering against in data pipelines — I flag any source that stops returning data instead of trusting the blank.

If it's a handful of counties, a disciplined spreadsheet with a "last checked" column per source goes a long way. Once you're across many counties or many properties per auction, that's when it pays to pull it into one place automatically and re-check the day before the sale.

How many counties are you looking at, and are you leaning wholesale or buy-and-hold? Happy to sketch how I'd set up your checks either way.

Account Closed · Answer

@Simone Owens, totally agree on leading with the assessor record. The side-yard example is exactly the kind of thing that can look fine on a listing app and fall apart the second you pull the actual card. I also like your point about the separate federal lien check. I don't like relying on the county index alone for that either, especially when the downside is finding out after the sale. Good reminder that when you're remote, the order you run the DD in matters almost as much as the steps themselves.

Brett Sanborn · Answer

Great question — this is something I've spent a lot of time systematizing. Here's what my pre-auction workflow looks like now:

Step 1: Legal Description scan (15 minutes for a 500-parcel list) Before anything else, I scan the Legal Description column for red-flag keywords: drainage, easement, common area, HOA, sliver, non-buildable, right-of-way, retention. Anything that hits gets flagged immediately. Usually eliminates 10-30% of a list without any further research.

Step 2: Assessed value vs. lien ratio If the lien is more than 15-20% of assessed value, I get cautious — that's a high redemption risk AND it suggests the county may have inflated the assessment. I want cheap liens on undervalued real property.

Step 3: County GIS + satellite check For anything that survived Step 1 and 2, I pull it up on the county GIS portal. I want to see: actual structure on the property, road frontage, no obvious environmental issues (standing water, wetland markers), and a usable lot shape.

Step 4: Ownership history If the county allows it (many do), I look at the ownership chain. A parcel that's been bouncing between banks or has been tax-delinquent for 5+ years usually has a reason.

Step 5: Flood zone check FEMA flood map zone AE or VE = pass unless you have a plan. Zone X = generally fine. This is a 30-second check on FEMA's flood map service.

This process takes me about 2-3 minutes per parcel after the initial cull. For a 200-parcel list I'm targeting, I can get through serious due diligence in an afternoon.

What state are you working in? Some county portals are dramatically better than others.

Jay Toluganti · Answer

I did try to buy tax sale properties back in 2021-2022 in Atlanta and surrounding counties. I had similar checklist. I also used to drive down to Atlanta to make sure I check the properties and neighborhoods physically. Because, sometimes the property might be burned down. Other times the property is in bad neighborhood even though zillow shows good ARV. I was taught that I need to woory only about IRS liens. Mortgages and all are wiped out. But a good investor will always check everything. I typically would end up with 3-5 properties shortlisted but other investors would overbid. That worked that time because the market is raising and most of them are flippers. Things are different now.

But before you go any further, whats your end goal? Are you trying to wholesale these (most tax sales are bought sight unseen) or trying to build a portfolio?

As you observed, tax sale is like you are going in blind, unlike a flip where you have due deligence period where you can back out. So, figure out whats your strategy is and then decide which route to take. Every route will take you to your destination. Challange is, figuring out which route takes you fastest.

Below are my book recommendations for you to read/listen to:

Strategy:

Rich man in Babylon

Robert Kiosaki

• Rich Dad Poor Dad
• Cashflow Quadrant
• Guide to investing
• Real book of Real Estate

Real Estate Journey:

Ken McKelroy

• ABCs of Real Estate Investing
• Advanced book of Real Estate Investing
• ABC of Property management

Simone Owens · Answer

Quote from @Don McAlpine:

Makes sense. The investor flip works for the same reason your cash hold did, they can sit through a title-clearing timeline without an underwriter breathing down their neck.

The seller-finance one I'd watch. Looks cleaner with no bank at closing, but you didn't lose the underwriter, you just handed them to your borrower. Their exit is a refi to pay you off, and that's when an unreleased federal lien shows up in their title commitment and kills the closing. If they can't refi, they can't clear your note. So clean title is still your problem, it just waits.

That's why I start the release the day I take the deed. On the seller-finance ones, are you getting a policy issued before you carry the paper, or just handing over a warranty deed?

Don McAlpine · Answer

The property needs a clean title before offering seller-finance and buyer and lender title policies are required.  IRS and any other liens cleared...buyer goes through underwriting, albeit with more flexibility but established guidelines.  Seller finance is only offered to owner/occupants.

Mark Dusseau · Answer

Marcelo — Good question, and your checklist is solid. The challenge you're describing — every county website is different, information spread across multiple places — is the exact reason most auction investors either (a) limit themselves to 1-2 counties they know well, or (b) hire someone to do the legwork and hope nothing gets missed.

A few things I'd add from the operations side:

Title search depth matters more than breadth. Rather than checking every possible lien type manually, I'd prioritize a full title search on your top 3-5 targets per auction. The cost ($150-300 per property depending on the county) is worth it compared to the risk of inheriting a surprise federal tax lien or a surviving mortgage. For the rest of your list, a quick county records check is usually enough to decide if it's worth the deeper dive.

Systematize your checklist. If you're bidding regularly, build a simple tracker (even a spreadsheet works) where each property gets a row and each diligence item gets a column with a status: not started, in progress, clear, flagged. The biggest risk in auction DD isn't missing a single item — it's losing track of where you are across 10-15 properties when the auction is 3 days away.

On the speed vs. depth tradeoff: The investors I've seen do this well batch their DD in two passes. Pass 1 is a 15-minute screen per property (county records, Zillow/Redfin comps, Google Street View, quick lien check). That eliminates 60-70% of properties. Pass 2 is the deep dive on survivors — title search, code violation check, attorney review if needed.

The county-by-county variation is real and frustrating. If you're working across multiple counties, documenting each county's process once (where to find tax records, who to call for lien info, turnaround times) saves massive time on repeat auctions.

How do you guys do due diligence before bidding at tax deed / foreclosure auctions?

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