BY TED THOMAS— The secret to becoming a successful investor in tax defaulted property (tax deed) real estate is to know the who, what, when, where, why, and how these tax auctions take place.
The golden rule to buying tax-defaulted properties is this: Know what you’re buying. This includes the size of the parcel, how many buildings are on it, zoning, restrictions, easements, the annual amount of property taxes, the appraisal value, previous sale prices, and current condition.
Taxes are usually assessed at 1 to 1.5 percent of the property’s value. So a piece of real estate valued at $100,000 will be assessed somewhere around $1,000 in taxes.
Three years of back taxes would equal $3,000 and the county will probably ask for a minimum bid at the tax defaulted property auction of $3,500 because the county will add penalties.
The next question that must be answered is where and when are the auctions taking place? Normally auctions are conducted at county offices, but not always.
Regardless of the location, it will be announced in advance of the auction. Some counties hold one big annual event while others schedule tax defaulted property auctions monthly.
Secondly, you must know how the bidding process works. Rules vary from state to state, taxing district to taxing district. Some counties use an online bidding process which is becoming more and more popular, but the majority still hold live auctions you may attend in person.
At the auction, each parcel number is announced in turn; then the auctioneer asks for opening bids. It works much like any other auction; the bidding goes up until there are no more bids. The person who wins with the highest bid gets a tax deed certificate from the county treasurer’s office.
Make note there’s dozens of unique bidding processes, this is only one.