Real Estate Auctions

Purchasing property for back taxes sounds like a great idea. You get this fantastic home for next to nothing, and you can live in it, rent it out, or flip it quickly for a profit. However, if you are like most people, you do not know where to start, how to go about it and what pitfalls to be on the lookout for.

Of course, the best place to start is at the county records room in the county in which you want to buy property. Here you can find out exactly what properties are for sale, when they go on the auction block and the amount of taxes due on them. While you are there, you should check out what other liens, if any exist that you will have to pay off. With this information in hand, you may go to the tax auction and bid freely, knowing what will have to paid should you win the auction.

It sounds good to this point, but here is the kicker. The owner, even after the tax sale will have a certain period of time to pay off the amount of taxes owed on the property. This will vary by state, and can be anywhere from six months to five years. You will have to wait until the appropriate amount of time has expired, and then foreclose on the property. Invariably, the owner will usually come up with the money at the last moment, pay the tax, and retain his property which is his right to do under state and federal laws. After up to five years of waiting around, you may end up with nothing for your time.

There is, however, an easier way. After checking with the records room of your local courthouse and finding a likely property to buy, you may contact the owner directly. This is especially effective the nearer to auction time that you contact him. If you are close to the deadline, it may mean that the property owner is really in a bind and cannot come up with the money to pay the tax lien. You may be hesitant to do this, thinking that the property owner may get upset with you for trying to take advantage of him. However, this is far from the case.

If you offer to pay the property owner at least part of his equity and clear out the back taxes, he will probably welcome you with open arms. As it stood before your contact, he was coming very close to losing all of his equity. He will probably feel that partial equity is better than none at all.

After you come to an agrement on how much equity you will pay the owner, draw up the contract and deed (or have your attorney do it), pay the equity and the back taxes, and you have bought yourself a home. You probably have paid only pennies on the dollar for the home’s actual worth, and you have actually helped the homeowner out of a no win situation.