A large part of buying tax-delinquent properties is the preparation process. Only bid on listings you have researched. Even if a tax-delinquent real estate opportunity looks good, pause and research before deciding to bid.
Here are the best practices for buying tax-delinquent properties.
Explore Local Tax Sale Regulations
Each municipality has rules for tax sales. Understanding these regulations is essential, especially as they pertain to how to make a bid, any grace period, and the process involved in gaining full ownership of a tax-sale property.
Follow All Tax Sale Rules
Whether by auction or public tender, ensure you fulfill every obligation in making a bid to avoid being disqualified for administrative error. If it’s an auction, you may want to attend a tax sale auction before bidding to familiarize yourself with the dynamics and get comfortable.
Conduct a Full Title Search
A tax-delinquent property may have liens, mortgages, or legal claims attached to it. A title search will reveal everything and ensure you know what you’re inheriting if you buy a specific tax sale house.
Research a Tax Delinquent Property
You may not be able to enter the property for an inspection, but you can still check its condition and surroundings from the road. It’s also a good idea to look at the neighbourhood, go through municipal records, and do a quick Google search to learn more about the property.
You can see the resale value of a tax-delinquent property based on recent sales in the area. Some investors may even contact local real estate agents for more information.
Set Your Budget Wisely
Be strict with your budget. Set what you’re willing to bid on a property based on its potential value and repair costs. Remember not to exceed your minimum amount.
It would help if you stopped making bids at a certain point in the bidding process, particularly at an auction. Emotional bidding, overbidding, and determination to win a property can get you into financial trouble.
Bid Your Best Amount for Public Tender
When a property is up for tax sale by public tender, it’s not a chance to compete openly with other bids. Investors only get one bid. This is why you want to put forth your best and most fair bid using the word ‘go.’
Don’t worry about other bids. Instead, pay attention to what you bid for. Many first-time tax-delinquent property buyers compete with others and wonder what others have bid on the property. This is a terrible habit to fall into. Focus on your bid and how to make your best bid regardless of what others may or may not be putting down.
Make a Tax Sale Buy Profitable for You
Focus on properties that suit your needs and how you wish to profit. Consider location, size, and market trends. Depending on your objective, a distressed or poor neighborhood may suit you.
Zoning and Land Use Restrictions
If you intend to re-develop or renovate the land to make it different from how it’s classified presently, verify how it is zoned. There may be restrictions on renovating, expanding, or changing it.
Also, keep an eye on any possible changes to the area’s zoning laws or land use plans. Local governments sometimes update zoning maps, which might impact your property’s future value or how you use it. For instance, a home could be re-zoned for business purposes, increasing its market value.
Damage and Additional Costs
Only some tax-delinquent properties are in perfect condition, though some are better off than others. Be emotionally and financially prepared to discover issues such as structural damage or outstanding utility bills.
Wait for the Grace Period to Finish
The original owner may have enough time to reclaim the property before you assume full ownership. To safeguard your money, do not complete any repairs or renovations until after this redemption period.
Invest in Title Insurance
Title insurance is worth the cost. It can protect you from legal claims or defects found after purchase. Title insurance can help mitigate some risks associated with ownership.
Connect with a Real Estate Lawyer
A real estate expert can help handle title clearance, existing liens, and former owner disputes, including pursuing legal eviction. A lawyer by your side can help you steer clear of complex matters.