If you're planning on attending a tax lien or tax deed auction, be prepared for these roadblocks to success:
Tax Foreclosure (Lien) Sales
-You will have to research hundreds or thousands of liens to buy just a few
-You can only inspect potential tax foreclosures from the outside
-You will need all cash at the sale
-Because of competition at the sale you will not get all the liens you wanted. Or you'll have to bid above the minimum
-You will need to hire an attorney to do legal noticing
-You will have to wait 1-4 years to get any tax foreclosures, depending on the state
-Most of your tax liens will pay off, giving you no tax foreclosure property
-Any tax foreclosures you DO get will not have marketable title. You'll need to do an additional process called a quiet title.
Tax Foreclosure (Deed) Sales
-You will have to research upcoming tax foreclosures you might bid on, though much fewer than with a tax lien sale
-You can only inspect tax foreclosures from the outside
-You will need cash at the sale
-You will have to bid up the price for the deed with other bidders. Bidding often goes to near market value
-Tax foreclosures you buy at tax deed sale will not have marketable title. You'll need to do a quiet title action before you can resell.
I expand on the issues with tax deed sales in my article on tax sales found here.
Sound discouraging? Despite all the pitfalls of participating in tax foreclosure sales, it turns out that they produce the best opportunites in real estate. IF you know a few insider secrets, that is.
Tax Foreclosure Insider Secrets
As you can see above, participating in tax foreclosure sales is not the way to go. All of the research, risk, bidding, capital requirements, and waiting involved take most of the benefits away.
The secret to profiting from tax foreclosures successfully, in a nutshell? Contact the owners of tax foreclosure properties that are just about to go to tax deed auction or that have had a lien sold in the past and not redeemed, with the redemption deadline approaching.
Here's why you should deal with the owner instead of attending the sale:
-You only have to research the properties where you have a potential deal with an owner
-You can do a full inspection of the property since you'll have the owner's permission
-You need as little as $200 to obtain a deed from a tax foreclosure owner
-OR you can flip the property to another investor with NO money invested
-Most tax foreclosures nearing the auction are free and clear. The bank would likely have paid the taxes by now if they had a mortgage
-You get title to the property immediately, from the owner. There are no additional legal procedures (quiet title) required
-You aren't competitive bidding against anyone else
-Many owners of tax foreclosure property DO NOT WANT them and were about to let them go. They'll often sell CHEAP.
You need to watch for existing liens or mortgages when buying tax foreclosures straight from the owner. While most tax foreclosures don't have mortgages, but many DO have miscellaneous liens against them. Unlike buying at the tax foreclosure sale, which wipes out any liens or mortgages, buying from the owner leaves any encumbrances intact.
So, ask the owner about the existence of any liens or mortgages first. Then do a quick search online at the county recorder's office to see if you find anything. If all looks well, only then should you spend money on a title report.
Tax foreclosures are the way to go in real estate - IF you use the insider secret I just shared with you! Be sure to get details on this strategy and others with my free Insider Tax Sale Strategies report, available free on the right sidebar. Then start profiting from tax foreclosure property almost immediately!