What do I need to know about buying tax lien properties?
Eli FacklerPro Member
Member since 2025 · 11 posts · 16 votesWhat do I need to know about buying tax lien properties?
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St. Louis, MO · Member since 2019 · 10 posts · 11 votes
3wLike Ned said above, check the specific rules for your county/state. My county sells the tax debt, but gives the owner 12 months to pay it back + 10%, and if they don't, then you can foreclose on the property. That looks much different than buying at a foreclosure sale, which is what everyone seems to expect with these.
good luck!
7 Replies
- Contractor · Baltimore, MD · Member since 2019 · 14 posts · 13 votes3wSpot on for asking before jumping in—your instincts about having cash ready and dealing with occupants are right on the money. Since it's your first time, here are a few extra lessons learned the hard way that are worth keeping in your back pocket: 1. Verify the Lien vs. Deed status immediately. Make sure you actually know whether you are bidding on a Tax Lien Certificate (where you're buying debt and waiting out a redemption period) or a Tax Deed Sale (where you are bidding on the actual property ownership right then and there). The legal timeline, risks, and strategies for both are completely different. 2. Double-check the IRS factor. People often assume a tax sale wipes the slate clean. While local property taxes usually take priority, federal IRS liens can survive a tax sale depending on how the municipality handled the notification process. If the IRS still has a claim on it, you could win the auction and still not have clean title. 3. Assume the inside is a total gut job. Since you can only see the exterior, mentally budget for the worst-case scenario inside—mold, stripped copper plumbing, a caved-in roof, or structural rot. If the numbers still make sense with a heavy rehab budget factored in, you've got a deal. If it only works assuming the interior is move-in ready, walk away. 4. Don't touch the property. Even if it looks abandoned, knocking is fine, but stepping foot inside or changing anything before you legally own the deed is trespassing. Good luck if you pull the trigger! What state or county is the auction in? Local rules (like redemption periods and statutory interest rates) change drastically depending on the municipality.
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes3w
You don't say which state you are in. Tax sale laws and procedures vary dramatically from state to state. While it Can be lucrative, there are lots of pitfalls and risks in buying tax sale properties.
First and foremost is the actually a tax lien or a tax deed sale? If you are buying a tax lien, you do not own the property only a lien against it. You may be able to foreclose on that lien but no guarantee you will get the property. If it is a tax deed, you are actually buying the property. However each state has different rules regarding your rights. There may be a "redemption period" for example.
You need to know the rules in your state and local jurisdiction to understand the hidden costs and risks. Good luck. - St. Louis, MO · Member since 2019 · 10 posts · 11 votes3w
Like Ned said above, check the specific rules for your county/state. My county sells the tax debt, but gives the owner 12 months to pay it back + 10%, and if they don't, then you can foreclose on the property. That looks much different than buying at a foreclosure sale, which is what everyone seems to expect with these.
good luck!
- Investor · Pacific Northwest · Member since 2026 · 511 posts · 286 votes3w
Eli — before you bid, I’d separate this into two completely different underwriting exercises:
1. Am I actually buying a good house at a good basis?
2. Am I buying the right to own that house cleanly?People spend 90% of their time on #1 and get smoked by #2.
First, make absolutely sure you know what this sale legally is. “Tax lien,” “tax deed,” “sheriff’s sale,” and “foreclosure sale” are not interchangeable. Depending on the jurisdiction, you may be buying the property, buying a lien that can later be foreclosed, or buying subject to redemption rights or other surviving interests.
Then I’d build the diligence stack from the outside in.
Title first.
Pull the parcel, owner history, mortgages, judgments, municipal liens, HOA/condo claims if applicable, federal liens, code enforcement, utility balances, probate/succession issues, and anything else recorded against the property. I would want to understand exactly what gets extinguished by this particular sale and what can survive it.Do not assume “auction = clean title.”
Occupancy second.
An empty-looking house and a legally vacant house are different things.Who is the record owner?
Where are their tax bills going?
Is there a lease recorded or otherwise discoverable?
Are utilities active?
Any eviction history?
Any mailing address different from the property?You are trying to figure out whether you’re buying a renovation or buying a renovation plus an occupancy/legal problem.
Then underwrite the structure like it hates you.
If I cannot get inside, I assume:
roof is near end of life,
HVAC is dead,
plumbing has problems,
electrical needs work,
water intrusion exists somewhere,
kitchen/bath are full replacement,
flooring is gone,
there may be mold/pest damage,
and I carry a contingency on top of all of it.Not because all of that will be wrong.
Because the auction discount is compensation for uncertainty.
I’d also look hard at what the outside can tell you:
roof lines and sagging,
foundation movement,
window condition,
electrical service,
HVAC equipment age,
drainage, grading,
tree/root issues,
visible plumbing penetrations,
additions that may not be permitted,
fire damage,
boarded openings,
and whether the neighborhood supports your finished value.Then establish your maximum bid before auction day.
Not “what would I be willing to stretch to?”
A hard number.
Something like:
conservative finished value
– worst-case rehab
– title/legal/possession cost
– holding + financing cost
– selling/closing cost
– contingency
– minimum profit required
= maximum acquisition basisAnd if somebody bids $1 over it, let them own it.
That discipline is especially important at auctions because everyone gets seduced by the spread between the tax amount and the Zestimate. The amount owed has almost nothing to do with what you should pay.
The other thing I’d do is underwrite multiple exits before buying.
If the flip market softens, can you rent it?
If rehab runs 25% over, does the deal survive?
If possession takes six months, do the numbers survive?
If you cannot immediately get marketable title, what does that do to your refinance/resale timeline?
A great auction deal should still look pretty good after you beat it up.
Now if you really want to party, send me the address of the house.
I’ll look at the actual property, neighborhood, value range, visible condition, likely rehab, ownership trail and the deal structure with you. That’s where this gets fun.
Michael
ChefreyOS - 3wAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Eli, for a first tax-lien or sheriff’s-sale purchase, I’d be much more concerned about title, redemption rights, occupancy, and what you cannot inspect than whether the house looks good from the outside.
Before bidding, I'd want a real estate attorney or title professional to confirm exactly what interest you're buying and which liens survive the sale. Depending on the type of sale and jurisdiction, you may still have issues involving mortgages, municipal liens, HOA balances, IRS liens, redemption periods, or other claims. I would not assume the sale automatically gives you clean, marketable title.
The possibility that someone is still living there is another major issue. Buying the property generally doesn’t mean you can simply enter or remove the occupant immediately. You may need to follow a formal possession or eviction process, so I’d budget both time and money for that possibility.
Since you may not get an interior inspection, I’d also underwrite a much larger repair contingency than you would on a normal purchase. Assume there could be plumbing, electrical, HVAC, water damage, structural, or deferred-maintenance problems you cannot see.
From the tax side, keep very clean records of the purchase amount, legal/title costs, and rehab expenditures. Your tax basis and the treatment of the rehab will matter once you decide whether you’re going to hold the property as a rental or renovate and resell it.
For a first one, I’d rather lose the auction than win a property where I don’t fully understand the title and possession risk.
Happy to connect and share some of our resources that might be helpful!
INVESTOR FRIENDLY CPA®5241 Reviews - Member since 2026 · 31 posts · 9 votes2w
Eli, a few people have told you to find out which type of sale this is, which is right, but nobody's said where that answer actually lives. So, concretely: the terms of sale for that specific auction.
Every sale publishes one. Usually a PDF on the tax collector's or sheriff's page, sometimes only in the newspaper legal notice. It tells you deed or certificate, whether there's a redemption period and how long, what's extinguished, and your deposit and payment deadlines. Two to four pages, and it's the highest-value thing you can read before bidding.
Then call the office running the sale and ask one question: what survives. Ask specifically about municipal and code enforcement liens. Those ride through in a lot of places and they don't live in the recorder's office, so a title search comes back clean while the balance sits in a different department. On one house that's a phone call, not a project.
On the knocking, right instinct, but no answer isn't evidence of vacant. Mail piling up, whether the meter's spinning, and where the tax bill gets mailed tell you more than a door does.
What state is it? That changes half of this.
- Englewood, NJ · Member since 2018 · 356 posts · 60 votes3d
Great answers above, especially Michael's breakdown on title issues. I'll add something from the Broward County tax deed side since I've been bidding on those.
The big thing nobody mentioned: in Florida, tax deed sales wipe out most liens BUT the 30-day redemption period still applies. If the original owner redeems, you get your money back but zero profit. I've seen people bid on properties thinking they got a steal, only to have the owner redeem and they're out all the closing costs.
Two things that burned me early on:
1. The property is sold AS-IS with absolutely no due diligence period. You better have driven by it and checked the appraiser's site before auction day. I had one property where the structure was partially collapsed — couldn't tell from the listing photos.
2. Occupancy is its own nightmare. Some of these properties still have tenants or squatters. Florida's eviction process takes 2-3 months minimum. Factor that into your rehab timeline and holding costs.
The upside is real though — I've found properties at 30-40 cents on the dollar vs retail. The key is being extremely selective and doing your homework on the actual condition before you bid. Don't get caught up in auction adrenaline.
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