A takeoff from Deanna of Texas. Anyone who has bought homes in a tax foreclosure, any pearls of wisdom?

I bought one that had several liens on it.

Still does.

That said, I bought it for $10k...spent $10k....and have been renting it without vacancy for about 8 years now @ $700/mo.

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Didn't you recently post "Bank Owned" yesterday?

For me, tax foreclosures go in waves. There can be nothing good one year, and I might buy four another year.

In Texas, the specific rules can vary from county to county. For example, in my county, you have to pay your entire bid to the County Treasurer by x:00 that day, but they would really prefer it within the next hour. Otherwise, it goes up for re-bid shortly after x:00. But there was the one investor who was a known quantity from another city in another county, and he won something and told them, "I'll just head back and pay at the attorneys' office--" and they were good with it. Or there was the little old lady who won something, and thought she had a month to come up with a bank loan, and accidentally went to the appraisal district to pay, and took half an hour to get the block or two from the appraisal district to the treasurer's office in the courthouse. She went twenty minutes past her deadline--- and she had outbid us earlier--- and we were willing to scoop it up if she didn't come through--- but we didn't make a big deal about the technicality. In more urban areas, they'll register the bidders, along with their contact information, in addition to recording the bids, so that if the winner doesn't arrive, they're able to offer it to the second-highest bidder at their last bid amount, rather than rebidding from scratch. Or in some areas, they'll register the bidders ahead of time and make sure no one is delinquent on their property taxes. That's an automatic disqualification for being able to bid in the first place, but not everyone checks ahead of time.

Around here, you get commercial bidders bidding on mineral rights. Land gets bid up to market value but no more, although lots and very small tracts tend to get passed over. Houses are generally serious fixer-uppers. They traditionally have gone for relatively little--- a lot of WWII housing in that $6-$10k range--- although in more urban areas, they wait so long for the property taxes to accumulate that they're more in that $30k-$60k range. However, over the last few years, even in my market, things that would have sold for $6-$10k (with a $40-$50k renovation attached to each one of those, and a $500-$700/month rent rate) are now selling for $30k+, because a lot of urban investors have been pressured out of their own markets, and they are anxious to buy something, even if it's an undesirable market. So they buy a house you can smell from the street, and try to flip it, or rent it, with zero work done. Ew.

So. Presuming that you've won something, you get a sheriff's deed in the mail in about a month. That's when your clock starts ticking-- when that document gets issued. The former owners have a six-month right of redemption for a normal property. If agricultural land or someone's registered homestead is in play, they have a two year right of redemption. In order to redeem a parcel, they need to pay you your purchase price, plus some other things. (A percentage that varies based on how much time has passed, possibly extra improvements if you need to make a major repair immediately.) So it's important to me to know what the story is behind each place we're considering bidding on, because I want to know how much drama is on the radar. Empty houses are the best.

I've only had two houses redeemed from me. They were next door to each other, and owned by the same guy. One was a registered homestead, and the other was an investment property. English was not his first language, and he had just poured a brand-new driveway. We gave him heads-up that we had bought it, and he needed to get in touch with the tax attorneys. He was not grateful, but he did what was necessary. ;)

You also need to double-check how many years' worth of property taxes are being paid in the sheriff's sale. There have been times where I haven't paid attention, especially in that September-February time period, and there's an extra year's taxes that need to be handled before everything is square.

Another thing to check is which lots are being conveyed in the sale. For example, I bought a house on a big lot back on 2014. Everything was enclosed by a big fence, and I didn't think twice about it. Fast-forward to 2021, and the previous family that owned it showed up. (Complicated situation involving a divorce, multiple generations with the same name, and so on, so even I'm not clear as to who exactly owned what.) But the point was, within that fence, the lot with the house had been foreclosed on, but the lot without the house had never been foreclosed on. Cue the drama, but I bought it from them, they went away happy, and I resolved to pay more attention to the GIS maps online.

For the most part, tax sale houses (in my poor/isolated/rural area) tend to have been treated pretty roughly. You have to be mentally willing to entirely gut a place and take care of all the major systems. If it turns out that it's not necessary, that's great-- but if it is, it's what you were expecting to deal with.

The last house I bought was a duplex with an extra house in the back in 2020 for $8k. The duplex was a $60k renovation ($30k/side) and took me from January-October 2022. (Electricians, plumbers, and windows were the biggest holdups.) Each side rents for about $500/month-- so it will take about six years to gross back my initial acquisition plus renovation costs. Currently using the back house for storage.

The last parcel I bought was four contiguous vacant lots for $2k each in 2022. My original thought wasn't practical (I was thinking about doing some kind of a small playground so that kids don't have to try to cross the highway to get to our preexisting parks/playgrounds, but liability and insurance would make that difficult), but I'll find a use for them someday.

Rick,

I made good money on some, lost one because the city tore it down during the waiting period.

Get more details. In Indiana some are quick ownership, some you have to wait 366 days after purchase.

Pay all cash now and wait.

If the owner pays up you make a few percent on your money.

If the home is decent the Big Dogs from Chicago with bulging wallets will pay full price. While waiting PLEASE put a lien on the property so it shows when someone else , like the city, steps in.

While you wait more expenses incur - I want to insure it, more taxes will be added, city will mow for $XXX each time…

You will be contacted by or meet at a live sale, attys who specialize in this process. If you miss one detail or deadline to notify, etc you lose your purchase.

It is do-able.

Rick,

I made good money on some, lost one because the city tore it down during the waiting period.

Get more details. In Indiana some are quick ownership, some you have to wait 366 days after purchase.

Pay all cash now and wait.

If the owner pays up you make a few percent on your money.

If the home is decent the Big Dogs from Chicago with bulging wallets will pay full price. While waiting PLEASE put a lien on the property so it shows when someone else , like the city, steps in.

While you wait more expenses incur - I want to insure it, more taxes will be added, city will mow for $XXX each time…

You will be contacted by or meet at a live sale, attys who specialize in this process. If you miss one detail or deadline to notify, etc you lose your purchase.

It is do-able.

Ooh, yeah. That's another good thing to keep an eye on-- make sure that the parcel at the beginning of the bid process is the same as the parcel at the actual auction itself.

I haven't had any torn down after I purchased it, but there was one I thought about tackling for a potential rooming house. Lots of space, proper zoning, good parking--- but needed a lot of love. The former owner had passed away, and the daughter had said she had no interest in it and would abandon ownership. We tried to connect with the daughter and at least purchase it for a token amount, but the stars didn't align. It went up for tax sale, but a week or so before the sale, the city razed it to the ground. Since we didn't want an empty lot, we didn't bid-- but an out-of-towner did, after he was outbid on the parcel he really wanted. I didn't know if he knew what he had actually bought, but never spoke to him because I didn't want to meddle. A few months later, we saw he had done a great job of scraping his lot clean for new build... but I also saw he had scraped the neighboring lot. In that particular case, the GIS map had an error. His lot was actually smaller than what the GIS map showed, because it was missing a boundary line.

The last tax upset sale we had, the bidding went high around here. Upwards of $7,000/acre for open fields in areas that would not perk.

I bid on two places. First one had a small fire in the kitchen and that place went for over $20,000 with an ARV of about $110,000. The Repair cost were really unknown. The second place had a $350,000 Medicaid lien on it. Its ARV would be under $150,000.

The standard 65% of ARV minus repair cost doesn't apply well on tax lien properties if you can't get title insurance on them for the first year.....so there will be additional holding cost if you plan on retailing these out.