How to Buy Tax Foreclosure Homes Free & Clear

Local governments have the authority to seize property for which property tax has not been paid. Normally, a tax lien will be placed against the property and the owner will have a statutory redemption period of 1 to 3 years in which the property may be redeemed by paying off the lien. If the deadline is not met, the government will foreclose on the property and auction it at a tax deed sale. Although winning bidders are offered no guarantees on the title to the property, it is nevertheless possible to obtain clear title.

Instructions

1. Subscribe to an online tax deed sale database. These sites offer nationwide information, and some of them offer limited inforrnation free of charge. Locally, read the legal notices that the county publishes in the newspaper it uses to advertise such tax sales.

2. Select tax deed sales you are interested in. It is best to select sales that offer more than one property that you like, in case the primary property is taken off the market before the tax deed sale.

3. Contact the county governments in which the tax deed sales are located and find out who is administering the tax deed sale. Likely candidates are the county property tax assessor, the county clerk and the local sheriff's department.

4. Contact the tax deed sale administrator for a copy of the registration and bidding rules, and for detailed information about the properties being auctioned. It is particularly important to obtain the tax appraisal of the value of each property.

5. Narrow your list of potential properties by comparing the appraised value of the property with the value of the tax lien. Since the minimum bid will probably be no lower than the value of the tax lien (unpaid taxes plus penalties and interest), the wider the gap between the value of the property and the value of the tax lien, the more profitable your investment is likely to be.

6. Perform title searches on the properties you are most interested in. You will be looking for outstanding liens (other than the tax liens) and for any defects in the titles (competing title claimants, for example). A title search can be performed by a real estate attorney.

7. Register for the tax deed sales you are interested in. Many tax deed sales require the submission of an advance deposit equal to the amount of the minimum bid.

8. Prepare cash or certified funds in various denominations, so that you will be ready to pay the amount of any winning bid immediately. Some jurisdictions allow you to pay within a set period (usually between 24 and 72 hours), so check the bidding rules. Remember that if there are other bidders on the properties, you may have to bid more than the value of the tax liens.

9. Attend the tax deed sale, bid on the properties you like and pay the amount of any winning bids. The county will issue you quitclaim deeds to the properties.

10. Pay any outstanding liens against the properties (except the tax liens, which were extinguished when you paid your bids).

11. File "quiet title" lawsuits for each property in the appropriate local court. You will need the results of the title searches. If your lawsuits are successful, you will receive new deeds to the properties with clear, marketable titles.

Tips & Warnings

• Because of the increasing popularity of online tax deed sales, it is now practical to participate in tax deed sales across the United States.

• Property owners often redeem their properties at the last minute, resulting in the cancellation of the tax deed sale. For this reason, keep up to date on the availability of the properties you are interested in.

References

• ReiClub: Tax Lien and Tax Deed Investing--The Fundamental Approach

Resources

• Tax-Deed-Sales: A Directory of Tax Deed Sales Information