How to Buy a Tax Foreclosure

When you are buying a new home and trying to save some cash, consider tax foreclosure properties in your search. Tax foreclosures are homes that are sold by the local government due to nonpayment of taxes on the part of the previous homeowner and are usually auctioned off in a public sale. You can get a good deal on one of these homes, but you have to keep the risks in mind as well. Some tax foreclosure properties require a lot of work to get the home up to acceptable living standards, and that cost is on your shoulders as the home buyer. Many tax foreclosures are sold sight unseen.

Difficulty: Moderate

Instructions

1. Be prepared with enough cash to purchase a home or get prequalified for a home loan. You can do this by going to any mortgage lender. You will need to provide the lender with information about your income and credit history, and the amount of a down payment you can afford to put on the home. Once you are preapproved for the loan, you will know what your highest bid can be.

2. Visit your county's tax collector's office or website to inquire about current tax foreclosures. The local tax collector's office is the division that decides to foreclose on a home that is delinquent in taxes. You will be given information about the next public tax foreclosure auction. You can also visit a paid tax foreclosure listings website like ForeclosureListings.com or FreeForeclosureDatabase.com to get a comprehensive listing of the most recent tax foreclosures in your area (see a few direct links under "Resources").

3. Visit the property that you would like to buy at the tax foreclosure sale. You may not be able to gain access to the interior of the home, but you can at least get an idea of its outer condition. Bring a home inspector with you if you can gain access to the inside of the home.

4. Attend the public auction, and place your bids on the property. If you win, some counties will require that you make a payment in cash that day for the property, so come prepared to cut a cashier's check, or make arrangements so your lender can close on the home loan and cut you a check that day.

Tips & Warnings

• Keep in mind that a tax foreclosure (deed) sale is different from a tax lien sale. With a tax lien, the buyer is purchasing the tax debt that the homeowner owes. The homeowner is then responsible for paying back the lien buyer with interest.
• The homeowner can pay the taxes due up to the day before the auction and keep the property. You will not be reimbursed for any money or time you invested in the property. Also, the previous owner may still be living at the property when you take ownership, so you will be responsible for paying for a formal eviction to gain possession.

Resources

• Foreclosure Listings
• Free Foreclosure Database