How do you guys do due diligence before bidding at tax deed / foreclosure auctions?
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.
Most Popular Reply
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.