Tax Deed Sales

Not all states auction off tax lien certificates, and even some that do still have tax deed sales. At tax deed sales you are not making an investment in a piece of paper with the intent to earn back a percentage when the owner pays off. You are bidding on the actual deed to the property due to non-payment of taxes by the owner.

The good thing about tax deed sales is the reward. You acquire the whole property! You can then sell it, rent it, live in it, whatever you want. The downside of course, is that you need a lot more start up money than with tax lien certificates. Also, unlike a lien state, a deed sale may contain a large number of vacant lots and properties in disrepair.

But hold on a second! I heard you can buy properties for PENNIES ON THE DOLLAR! Well, probably not. Most deed sales average around 50 cents on the dollar for a property, going higher or lower depending on the property.

Also, a very important note about tax deed sales: When purchasing a deed, you are NOT getting a warranty deed like you would get when purchasing a property in the normal way. You will get a sheriff’s deed, a tax deed, or a constable's deed. If you want to then sell the property at fair market value, most title companies will not accept this type of deed. You will need to file a "quiet title action". Someone is then allowed to claim rights to the property. This will mostly likely not happen, but it will still cost you between $1000-$3000 to have a lawyer do this. Once it is done you can get a full warranty deed. Definitely not a deal breaker, but something to be aware of.

A good tip is to consider selling the property wholesale to a retail seller. You can sell the property by way of a quick claim deed, which gives no warranties. Depending on how much you purchased the property for, you can still likely make a high percentage profit. Also, just as with tax lien certificate auctions, make sure to do your due diligence before a tax deed sale. Even more so, as your investment will be greater as well as your risk.

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