what to do after winning property tax auction

Discover what to do (and what NOT to do) when buying real estate at Foreclosure Auctions and Tax Deed Sales (besides known equally Tax Foreclosures). I am going to pull back the curtain and give yous an inside expect at how the pros do it. Although there are many pitfalls, this video shows you lot how to steer clear of them as well every bit make wise decisions when behest. This is a must scout for anyone considering bidding on a belongings at a foreclosure auction or tax deed sale (taxation foreclosure).

Secrets to Foreclosure Auctions and Tax Human action Sales

Foreclosure Auction: Mortgage foreclosure; the borrower doesn't pay their mortgage so they go through the entire legal process of a foreclosure and then the house goes to an actual county auction or parish.

Taxation Human action Sale: Tax foreclosure; the property possessor doesn't pay their property taxes, so a house is normally sold as a revenue enhancement lien first, then if the tax lien is not paid within a certain period of time information technology then goes to an actual foreclosure.

Auctions

If you lot have read my other blogs or seen my videos, so you know that I'm a creative real estate investor and that means that I am working directly with the seller not sourcing my deals from an agent, the MLS, or foreclosure auctions. But the truth is that there are sure circumstances where it actually makes sense to let a house go to auction.

Examples:

championship issues
Extra Liens on the title
A expiry which left multiple heirs
The heirs didn't have the money to pay for probate and they only permit information technology become to auction.
A messy title where it's better to let it go to auction, clear the whole thing out and so someone tin can buy information technology there.

In this business organisation there are procrastinators that will literally call you the twenty-four hours before the auction, which doesn't even give y'all enough time to phone call the lender, get an updated reinstatement, or updated payoff. .Even if the deal is a home run in that location's simply not plenty fourth dimension to go the information from the lender to actually purchase the property, even if yous have the cash in your bank account.

The Sandbox

Sometimes it makes sense to practise deals that go to tax or mortgage auction. These types of auctions are ameliorate and so the ones you lot will see on Auction.com or Hub Zoo because these are what they telephone call cash on the barrel head. You accept to pay the money at the time of the sale. This kicks out a lot of potential competitors, which creates a nice little barrier to entry. If y'all don't have the cash you can't play in the sandbox.

Abraham Lincoln once said that, "If I have eight hours to cut downward a tree, I would spend the first vii hours sharpening the ax."

The first seven hours is going to exist y'all preparing for the auction. You take to have your act together and you take to know your stuff because the auction itself is not where you're going to play all your games. The biggest game playing moments are when y'all are getting all of the data and doing your due diligence.

Property Homework

The starting time thing you need to practise in your hypothetical "first seven hours" is do your property homework.

Evaluate The Value

The first step in property homework is to evaluate the value. You lot might not exist able to ascertain the consummate full value because y'all may not be able to get inside but when information technology comes to condition you lot'd be surprised how often at that place is a back door or window that might exist open. Now, I'chiliad non suggesting you lot practise that but I know people that tend to detect a fashion to get inside the property if it's vacant prior to the actual auction occurring.

Assess the Condition

Y'all can assess condition on the exterior easily but the interior might be more difficult. The utilities won't be on so y'all won't know the status of the plumbing, electrical or HVAC, but you tin get some level of understanding past taking a look and looking at the age of the property.

These two come together though because in order to really understand value you accept to understand status. Y'all want to really start at the comparable sales to understand what the property tin can sell for all fixed up too equally what information technology is worth every bit is. These two pieces of information will assistance you better understand whether or not you should even waste your time going any further down the road of these seven hours of sharpening your ax. You can compare the property worth and potential worth with the opening auction bid.

Foreclosures

Ii Types of Foreclosures in the United States

Non-Judicial: it's normally going to show you the opening bid amount.
Judicial: they're going to show you the judgment amount.

Judgment is how much the foreclosing mortgage company is owed including all of their back payments and any interest or attorney'southward fees. The judgment corporeality is typically what the opening auction bid will stop upwardly beingness for the lender because is most cases the opening bid in judicial foreclosures is $100, merely information technology'southward not actually $100, because a representative from the bank will be present bidding the auction upwards until at least the judgment amount.

Opening Bid Amount

If the opening bid amount is really close to the property'due south value it's probably not going to be worth your fourth dimension.

Here's the example. If the opening bid is going to exist $100,000 and the value is $200,000, then this is an exciting potential auction considering in that location's a lot of room in the deal. So the bank volition tap out at the judgment amount and and then the only contest you are left with is other investors.

If the value is $110,000 and the opening bid is again $100,000, the problem is that the lender might go all the way up to their $100,000 judgment and so there's no existent room for turn a profit.

You might exist proverb, "Phil, what happens if the value is $80,000? Is the lender going to come up to their $100,000 opening bid?" Possibly not. They might max out at seventy. They typically exercise a drive by VPO or a bulldoze by appraisal right before the auction if they're in a situation similar this to ensure that they at least bid an corporeality that's reasonable. The holding could go for less than opening bid amount, information technology sometimes depends.

Now, I'1000 not talking most tax appraisal value, I'yard talking almost the actual comparable sales on the MLS closed comps value. I've got a neat video on that, Determining Property the Right Fashion, that'll help y'all better sympathise what I hateful. If you understand that the opening bid corporeality is going to be well below what the value is yous might take a promising deal.

Practise a Title Search

You lot need to know what's on the title because some liens will sometimes survive the auction, such as tax, property taxes, and even IRS tax liens. It'southward not but about liens either, y'all need to know about whatever remodels or builds on the property that never closed off on the building permits. That could be a existent problem, that could extend past the closing. All kinds of issues could occur.

I actually pay for a professional championship search. I can do title searches through the counties that I invest in online, only I go to the next level because I desire to brand sure there'due south no mistakes. When you practise make a mistake on this it can be very troubling. You lot buy a property with what'southward chosen a "muddy title" which is awful, especially with tax human activity sales where in many cases with a revenue enhancement foreclosure you have to file what'southward called tranquillity title. You have to file it after the endmost to have the ability to resell the property and requite the new heir-apparent championship insurance because when you lot buy at an sale you lot're non getting championship insurance.

Quiet Championship

When yous resell after you've bought at auction you don't always have the ability to give the new buyer title insurance, peculiarly tax act sales, and so sometimes y'all take file quiet championship. It is extremely important that yous sympathise this, which is why I get professionals involved. Even if you spend the money on the title search and the deal never comes together, it is still ameliorate safe than sad.

Figuring Out Your Max Bid

After you have washed all of the initial analysis of the property, you are now in the position to potentially consider putting together your max bid amount which is too incredibly of import. You want to get into the auction with a plan on what your max bid'southward going to be. Before you exercise that we have one more piece of this seven hours, and I'm going to telephone call it this...

Rules of the Game

My Lesson

In my beginning investor years, I decided to bid on a belongings at an sale. The property was in foreclosure for years and the borrower had continued to file frivolous law suits and throwing out all kinds of cockamamie schemes to keep the business firm from going to foreclosure. On the day of the foreclosure I won the selection at $385,000, so I wired in $385,000 cash to the county. Well, in this particular situation at that place was a 7 day menstruum where that borrower could dispute the foreclosure sale, and he did. When he disputed, information technology put the property into this limbo stage where I didn't own it so I couldn't fifty-fifty put insurance on the property. If information technology burned down my $385,000 was at risk.

The Issue

There were two judges in the county that were handling these disputes. Ane of them was on vacation for three months and the other one was way backed upwardly with work. It took seven months to finalize the auction deal. He really ended up winning the dispute then he got to keep the property, believe it or non, it was ridiculous. I received my money back eight months later and I didn't go any involvement on information technology. Thank goodness I got the money back it tied upward $385,000 of my cash. What the lesson there was this. Had I been smarter I would take looked up the foreclosure case records and I would have seen that this guy had filed all these frivolous lawsuits for years and years and years. That would accept told me that this was a risky i to bid on because somebody could have pulled this stunt.

Legal Assist

You're going to need proficient legal assist, either a foreclosure attorney or a real estate chaser that understands auctions and works with clients that really buy these properties at auctions because you lot could make a large mistake and it could exist very expensive. Now, this one ended upwards just costing me the fact that my money was tied up, for eight months, and so information technology was more like an opportunity cost.

Right of Redemption

A right of redemption ways that the person who was foreclosed upon has the right to redeem or buy the property back for the amount information technology went to sale for. An instance would be New Mexico. When the property goes to foreclosure, let's say it went to foreclosure for $100,000 and y'all won the bid, what if you started renovating the property, started fixing it upwards, and so all of a sudden 30 days into it y'all get a knock on the door and they say, "Aye, I still own this belongings, I went and redeemed information technology. Thank you for fixing up my property for free." It'due south happened, then you demand to understand the right of redemption.

No Right of Redemption

Now, certain states don't have right of redemptions on mortgages because of the human action of trust or the mortgage will actually nullify that. HOA, Home Owners Association, foreclosures sometimes still accept these right of redemptions also equally tax sales. You also take to understand the property's boundaries, what'due south going on with the property itself in regards to laws.

Example

A person was behest on a tax human activity sale on a vacant lot. A lot of times these tax deed sales are vacant state, not houses. The numbers seemed amazing and then he won the auction and so he later learned that that item lot had a historical overlay and it could non be congenital upon so the land was basically useless. It was in a residential community and he idea he could sell the lot for $100,000. He paid 10 grand for information technology and it turns out he couldn't build so he sat on it and he at present pays the taxes on it each year.

You need to empathize the rules of the game. I recall an chaser could really aid you become through all the things that could become wrong, what you demand to be aware of. Sometimes its situation will depend on whether information technology's a mortgage tax or an HOA foreclosure or what is involved in the bodily auction itself.

The Sale

Now that you've done your commencement seven hours sharpening your ax, we tin discuss the auction. The actual auction can be either in person online. When you're dealing with an auction there are a couple of rules I need you to keep in mind.

one. Max bid already determined.

There's this one particular sale where every single time that it was in session the aforementioned old Big Roy came in the room. He had his chest out and anybody who saw Large Roy, knew if he was behest he was going to put up a fight. They thought Large Roy was making a killing around town with all the deals he was doing. Oft, if he started bidding with you, you would e'er bid up a little more, considering if Big Roy was bidding on the bargain it must exist good.

Well, here's what the real story turned out to be. Old Large Roy, worked for a bunch of attorneys and doctors in town that weren't very smart. He raised a agglomeration of money and basically had a mini "Bernie Madoff Ponzi" scheme going where he would get the money from them, buy these properties, he'd ready them up a little bit, and he often lost money on them. New money had to keep coming in to pay off the old money and he eventually got in large trouble. All these people were thinking that Big Roy had his act together and it turned out that wasn't the game he was playing at all, he had a Ponzi scheme going.

Tips

You do non want to go into the auction and on the wing alter your bid
You want to be focused, you must have your max bid already determined, and don't change it.
What'due south going to happen is when you're there, especially in person, if you lot see another people bidding you might call up, "Peradventure they know something virtually the value that I missed. Maybe this thing'due south more valuable than I thought information technology was."
Don't think that way, you have no thought what they're up to.
Don't follow anybody else in the room. You accept your max bid and you stick to it.

2. For When You Lose

It's okay. I empathize, here in America we're very competitive. Nosotros dearest sports and we always want to win, win, win. You need to be okay with losing. I lose a whole lot when it comes to these auctions because I don't like paying very much. In that location's ever some sucker out at that place willing to pay way too much for some of these properties. Be okay with losing, it is not a large deal. Be okay if it doesn't go to sale, you'd be surprised, how often these properties never actually go to sale.

Revenue enhancement deed sales are pretty much 100%, they e'er go to auction. Sometimes, they'll pay it upwards the twenty-four hours earlier or maybe the lender volition postpone the auction because of some frivolous foreclosure defense attorney's letter, all kinds of reasons to push button off the auction. You may practice all your work and it may not go to sale but that doesn't mean information technology's going to always stay in limbo. Keep an heart on those, they may come back around.

three. For When Y'all Win

If you really win, congratulations, make sure you get insurance bound on that property. Information technology'southward easy to forget that detail but you're the owner now. If you're the possessor you'd better put some insurance on in that location, because it's probably a vacant property at that signal. Maybe there might even be some squatters in there.

If it is a tax deed sale and you have to do tranquility title brand certain you file for that. In a lot of cases, I know in Florida serenity championship can cost $2,000 so you take to factor that into your bidding. You'll take an extra $2,000 expense when you win a revenue enhancement deed sale.

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Source: https://www.freedommentor.com/foreclosure-auctions-tax-deed-sales-tax-foreclosures/