How to Buy a Home by Paying Back Taxes Owed

Purchasing a property for back taxes gives an investor interest, an inexpensive property, or both.

Purchasing a property for the back taxes owed can be a worthy investment. When property taxes remain unpaid, a lien is placed against the property by the county tax assessor. This debt must be paid by the property owner within a certain period of time; in the meantime, an investor can pay the back taxes and earn interest on the investment. If the property owner never redeems the tax lien, the property transfers to the investor. Here are some steps to purchasing a property for back taxes.

Instructions

1. Get your finances in order to make sure you have the cash necessary to fund the purchase a property for back taxes, which are sold on a "cash only" basis. Determine whether you will need to pull the funds from savings or take out a personal loan, and plan appropriately before looking at properties or making any bids.

2. Research a delinquent property as much as possible before deciding to make the purchase. Most back tax property sales do not allow potential buyers to examine the property's interior before auction. However, driving by the property and examining the exterior can speak volumes; exterior neglect and damage probably signals more problems inside.

3. Run a title search to find out if any other liens exist against the property, as these could transfer to you if you purchase it for back taxes. Other types of liens could include IRS taxes, mechanics liens for unpaid contractor's work, or court judgments.

4. Contact the county tax office to inquire how to purchase a property for back taxes in the area you are searching. Procedures may vary not only by state, but by county. Have a list of questions ready, and avoid tying up the employee any longer than you have to before ending the call. Find out if there is a list of properties coming up for auction that you can peruse online or at the tax office.

5. Attend an auction or two before purchasing a property for back taxes, if possible. Observe how the auctions are conducted by officials, how the bids are made and handled, and how quickly paperwork is completed. Once you feel confident in your ability to make an educated bid on a property, attend with money in hand to make a purchase if you win.

Tips & Warnings

• Have a list of several properties you wish to bid on, when attending an auction in which you will participate. If you do not win your top choice, you have other options available for possible purchase.

• The owner of the property still has a "grace period" to pay back taxes and avoid foreclosure and eviction, which could result in having to return the property after it is won at auction.

References

• Money Talk News: How To Buy a Property for Back Taxes
• Back Tax Auction: Real Estate Auctions

Resources

• Read this Article in Spanish
• Ticor Title: What's in a Property Title Search?