How to Buy a Property at a Tax Auction
Between 30 and 50 percent of the homes on the market in the first quarter of 2011 fell into the category of "distressed sales," according to RE/MAX and the National Association of Realtors. This term means the owners owe past due mortgage payments or property taxes, or both. When owners walk away from a property or the tax liabilities become significant, the county takes the property to sell at auction. These tax auctions offer a chance for the homeowner's mortgage company or homeowners themselves to repurchase the property through an auction process, but the auctions also offer an opportunity for others to bid on the property.
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Things You'll Need
- Purchase deposit
- Property inspection reports
- Lender authorization letter or mortgage approval certifications
- State-issued identification or driver's license
Instructions
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Attend several tax auctions in the geographic regions where you plan to bid prior to participating in an actual action. Every locality operates auctions differently, even within the same state, and familiarity with the formal process aids in understanding the most advantageous bidding strategies. Sheriff's offices in Indiana and Ohio counties conduct tax sale auctions, but offices subcontract the sales to a professional auction company to dispose of the houses confiscated under tax laws. Police departments conduct auctions in other states, including some Florida cities.
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Track targeted geographic regions for properties by consulting county websites, area print newspapers and county agency auction websites. Many states, including Indiana, provide tax auction links from the main state government webpage. By law, public auctions offering federal, state or local government property confiscations must post public notices that include the date, location, time and terms of the sale.
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Select an auction property and compile comparative sales for the auction property. Search county tax records to determine the value of comparable homes in the area of the auction property. Savvy investors hire licensed real estate agents and pay title agents to complete property valuation reports and search for any outstanding liens on properties.
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Examine the auction property with a home inspector or contractor for defects and problems. Homes at tax auctions sell "as found," "as is" and "without warranty." All sales are final.
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Register for the auction. Make a cash deposit, if necessary. Then bid in person or online to purchase the property. Bidding requirements vary with each auction, but many government agencies require prior registration, and some a refundable or nonrefundable deposit. Winning bidders with cash payments must show state-issued identification and provide cash in a form acceptable to the agency, such as a certified check. If the bidder uses bank financing, auctions require a letter of credit issued by a lender when registering or before the bidding. Some Indiana auctions require presenting the lender approval as part of the registration process. The final auction conditions for winning bidders include closing a mortgage loan within a set period of time, typically 30 to 45 days, but some agencies, including the City of Indianapolis, require payment in full by the next day.
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References
- RE/MAX: Real Estate 101-Buying Distressed Properties
- National Association of Realtors; Distressed Properties-Expectations and Impacts; Jed Smith; June 2011
- King County, Washington: Finance Services: Foreclosure
- King County, Washington; Finance Services; Foreclosure - Terms of Sale; December 2010
- City of Indianapolis and Marion County; County-Owned Surplus Property Auction; 2011
- Greene County Sheriff's Office: Foreclosures
Resources
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