Buying homes at tax sale or sheriff sale?

Question

What is the largest amount of tax you have seen owed on a property at these sales?

- When you purchase, do you just CURE the outstanding lien and it becomes your property?

Brian Faust · Answer

@Cameron Riley

Hi Cameron, search up some of @David Krulac posts on tax sales here on BP. He is the guru on these types of sales in our state; the process, laws, and intricacies vary a great deal from state to state.

Ned Carey · Answer

@Cameron Riley  the amount of taxes owned can vary tremendously. I have bought a lien that was $75k. that was for a building assessed at about $300k

Try the magnifying glass in the upper right corner.  There have been a number of posts specifically about Philadelphia tax/sheriff sales.  Buy tax sale properties is more complex that it sounds on the surface and there is definitely risk involved. I have acquired many properties through tax sales and have had my share of losses too.

Brian Faust · Answer

@Cameron Riley

No, I have not. I keep my eye on them but after reading more about them I felt they were too risky, not the right play for me right now.

I’m still relatively new to the RE investing side of things; I do think I’ll eventually target some more heavily but it’ll be after I gain much more experience and capital.

I’ll try to link some of the posts from David Krulac in this thread for you a bit later tonight

Cameron Riley · Answer

@Brian Faust

Hmm not quite sure how to find someone directly on this forum lol.

Have you purchased a home at tax sale?

Deanna O. · Answer

There will be a point where the County puts a tax lien on the property, and at that point the only thing that can keep it from going to a tax sale is paying ALL of the back taxes and fees. I am currently working to acquire a property that is in that situation. While the overdue taxes are only @ $4,250, there are additional late penalties & costs that the county has incurred that will bring the total amount due to @ $6,000. Once the County has the tax lien in place they start the process of bringing it to auction, which involves a process similar to a foreclosure as far as notifying all of the lien-holders, etc., so after a certain threshold the costs start mounting up pretty quickly.If it were to go into tax auction the tax portion would be @$7,500, but would include 2019 taxes.

Deanna O. · Answer

Yes. As long as they are catching up rather than getting behind the county is pretty OK with it. There are penalties (just like the IRS), but again, no motivation to seize the property.

Owners have the right to redeem the property by paying the back taxes up until shortly before the auction. County just wants their tax $. Lien holders can also pay the back taxes in order to protect their position, since the tax auction erases all liens. Thus a lender might pay the taxes, but that gets added that to the mortgage (being behind in taxes might also might trigger them to call the loan, since paying the taxes is usually a requirement of the mortgage).

Cameron Riley · Answer

@Deanna Opgenort

So what if someone is late on their tax payments? They can work out a deal w the county?

Deanna O. · Answer

They WILL send stuff to auction, and they get their $ if the property sells at auction, but they don't get any more $ than they would have if the owner had paid the taxes in the first place (they net taxes plus auction expenses, so it's a break-even for them). It's not a money-maker for the County & it's a hassle for the staff so there is no motivation to seize & auction the property if they can work with the owner.

If the County could profit $millions in real estate auctions it would be rather tempting try to sneak the property off to auction without an honest effort to get in touch with the owner (with elderly owners, serious illness, or a probate situation tax payments can easily get lost or overlooked).

Cameron Riley · Answer

@Deanna Opgenort

Why wouldn’t the county want to do tax sales?

It’s a great way to make their money back, it seems

Deanna O. · Answer

Here in CA I believe the tax sale wipes out pretty much all previous liens EXCEPT that for 120 days if the IRS has a lien they have the option of redeeming the property for what the bidder paid. There are a very few instances in which the courts might possibly reverse the sale, but they are few & far between.

After the tax auction the money goes first to pay the County taxes, then lien holders (if any) can file for the remaining funds, which are awarded in order (ie a first TD gets paid off in full, then the 2nd, etc...if they file for the funds). If anything remains the owner can file for the remaining funds. If there are no claims for the excess funds they are held by the State, and I believe eventually go into the state coffers. Basically, it's set up such that there is no particular motivation for the County to TRY to do a tax auction -- they don't profit from the sale, it's extra work & bother for them vs the taxes just getting paid. They are very motivated to work with the homeowners to resolve the issue.

Buying homes at tax sale or sheriff sale?

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