Going to a tax sale

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Well, I'm off to my county's annual tax sale. I was shocked to learn that we have over 1000 parcels of real estate in the sale this year. Apparently this is a little high but not dramatically so. Some of the offerings are for tax certificates on odd little pieces like a one foot wide strip between city lots but others are beautiful homes and nice land parcels. I'm going to bid on a 27 acre parcel which is adjacent to 11 acres I currently own. The bid minimum is just over $4200 though, like any auction, there's no upper limit. With a tax sale here all you're buying is a tax certificate which becomes a lien on the property. Anyone can come and redeem it for the owner withing a year by paying the tax plus 10-15% premium (depending on whether it's before or after 6 months from the sale date) plus 10% APR on the total amount bid. If no one redeems the tax certificate within a year the sheriff issues a tax deed which transfers ownership subject to no encumbrances except municipal and federal tax leins (of course). If a mortgage holder is asleep at the switch, they simply loose their collateral. Of course, they receive statutory notifications but stranger things have happened.

In this case, I'm in a rather unique position in that I'm going to bid because I AM the mortgage holder and the property is in foreclosure but that foreclosure is being litigated. I could simply pay the taxes (or rather could have through yesterday) but decided to go this way instead. I'm hoping to be able to be the successful bidder and force the other side to either pay these before the suit is adjudicated. If I can delay the trial for a year and they don't pay up, ownership of the property transfers and the foreclosure part of the suit becomes moot.

Needless to say, it ought to be interesting to see who's there bidding against me, if anyone, and how much they're prepared to bid. Wish me luck. ;o)

-- Gary in Indiana (gk6854@aol.com), September 13, 2001


Gary, are you saying that you either sold this property on contract, or bought it on contract, and the other side did not pay the taxes?

-- Judy in IN (whileaway3@cs.com), September 13, 2001.

I have heard of these tax sales before, but never had anyone to talk to about how they end up. Please post again after the sale. I am interested in how this turns out. Some folks claim you can make a living by purchasing property at tax sales, but I have never felt that it was a viable option. (I guess they figured they could make money on the interest paid, even if the property went back to the original owner.)

As slow as courts are in general it seems that you have a good chance to get that property within the year allowed. Good luck and keep us up to date.

-- Bob in WI (bjwick@hotmail.com), September 13, 2001.

First things first here. I was the successful bidder at $40,000 for the tax sale certificate on the 27 acre parcel. I don't own the property nor have any more rights to it today than I did yesterday. I simply bought a leinhold interest today.

Judy, it might help if I tell you Indiana is a lein theory state (lenders get a mortgage from borrowers while the title to the property remains vested in the borrower) as opposed to a deed of trust state wherein the lender actually takes title to the property until such time as the loan is paid off. I took the mortgage as security for an obligation and that obligation has not been fulfilled. That's how I came to be a mortgage holder on it. I hope this explains it satisfactorily. If not, please post again so I'll do a better job. ;o)

Bob, I don't know about actually making a living off a one or two day annual event, but there were what appeared to me to be some real professionals in the field here today. Two of the three biggest buyers today were from out of state representing mortgage/investment concerns. I spoke with the third, a local man who must've bought 100- 150 certificates himself. He told me he didn't want to actually ever own any of the properties. He was only buying in order to have the guaranteed 10% premium on the taxes plus the 10% APR return on that and any overbid amount. He told me he tried to buy only on properties with large mortgages as he felt confident the mortgage company would redeem the property.

I can see how this could be profitable. I can also see how you could get burned badly. Picture yourself the successful bidder on a nice little commercial building on a corner and ending up having the property deeded to you when it's not redeemed. Now picture the EPA showing up telling you about the old fuel tanks in the ground from half a century ago that need to be removed now that title has transferred. Of course, the tanks rusted and leaked so now you own a real albatross (a friend here has spent over a million dollars so far on the clean up on a gas station he closed over fifteen years ago).

I think research has to be the key to being successful in this. It would also take buckets and buckets of cash. If you want to earn a living at it, I figure you'd need ten times what you need for an annual income available in cash to pull it off. That's out of my league, I'm afraid. It sounds like I better just keep going to work in the morning. ;o)

I'd never been to a tax sale before. I researched everything I could about the tax sale and really questioned the appropriate offices until I was confident I understood the process. I was even up last night until well after midnight reading pertinent statutes in the Indiana Code online and I was there for just one property that I knew.

I, too had always heard bits and pieces about tax sales but had never researched them or attended before. Having done so now, I'd recommend going to one in your area if you have the time. I found ours quite interesting, but, then again, maybe I need a hobby. At the end of the day I was fortunate enough to have gotten the certificate I wanted, so I left happy. Poor, but happy. ;o)

-- Gary in Indiana (gk6854@aol.com), September 14, 2001.

In response to making a living at this tax sale and lein business. That is exactlly what it is. A Business, and Gary you are correct when you say it takes buckets of cash to make it work. You have to have enough money to buy 100 or more, and have enough money to live on for a least a yr. while your waiting for the money to come in from the properties you have put a lein on. IF you can do that, then it is possible to make a living at it. But their are very few who can afford to do that. I for one, know I can not do it. But for a hobby, it is fun and you may one day end up lucky enough to actually end up owning a nice property with no problems. Good Luck

-- Dr. Glenda Degler (jaybird58@madisontelco.com), February 16, 2002.

I am contemplating going to the DC Tax Lein Auction. I live in Ohio and it would require a full week to do the whole auction.

-- Dr H G Roland (rr3944@dragonbbs.com), June 30, 2002.

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