On February 23, 2007 the county of San Diego, CA had a tax sale. The purpose of the sale is to collect taxes that have been unpaid for 4 years. Traditionally, tax sales have been a good opportunity for investors to purchase real estate for pennies on the dollar. I personally know several individuals who have made millions buying real estate at these sales. I am writing this article to give you the skinny on these sales. There is a right way to do them, and a wrong way. Here are some tips for purchasing real estate at tax sales in California that might help you make a lot of money. Enjoy!
First, you must realize that most of the properties slated to go to sale will be redeemed at the last minute. Therefore, it can take weeks of prep time to research properties only to find that they are redeemed prior to the sale. My advice is to do all of your homework regarded desirability of the property but save the drive by on homes for several days before the sale. That way you can eliminate a lot of properties and save yourself hours of drive time. Notice that I said homes. This does not include land. Land is harder to find and can be more complex in your assessment. You will want to take more time to evaluate land.
When considering purchasing property at a tax sale you must remember that even though loans against the property will be wiped out, there are many liens which will not be wiped out. liens such as over due HOA dues and assessments, county special assessments, and other liens such as the IRS will not be wiped out. So buyer beware! You must run a title report on the property to find out what liens are affecting it. If there is an IRS lien, you may purchase the property anyway. However the IRS has the right to enforce its judgement against the property for up to 120 days after the sale. They will reimburse your cost of purchase, plus fees from the sale, plus pay you 6% annual interest on your money if they decide to take the property back. The main problem with this is that you will not want to improve the property during this time period. And since title companies will not write a policy on properties conveyed by a tax sale for up to 1 year, it also makes it almost impossible to resell the property in less than 1 year.
In addition to finding out the liens against the property, don’t forget to find comparable sales of similar properties. These should also include active listings so that you will know what your competition looks like. This information is critical in order to determine your maximum bid price. It was obvious at the sale that some people just get carried away with owning a piece of their dream. I recommend sticking to your numbers. Remember if this is a house, you are buying it sight unseen, so you better leave plenty of room for repairs. These properties are truly “as is” properties with no disclosures or warranties. There is plenty of risk in this transaction. Thus the need to purchase it for pennies on the dollar.
At the sale you will be expected to put at least 10% down or $5,000 which ever is greater and pay for the rest of the purchase within 30 days. The county only accepts cash, money order, traveler’s check, or cashier’s certified check.
When you attend the sale, the auctioneer will review all of the rules with you and then the bidding begins. To bid, you simply hold up your numbered card when the price that you want to bid is called. Your ID number/ bid card will be assigned to you at the time of preregistration.
While at the sale I saw a few people buy decent properties but most purchases seemed to be a huge error. I am not sure if these people were neighbors looking to acquire the land to block building, but if they were not, they will likely be very disappointed in the near future. As a matter of fact, I saw one guy buy a lot for $240,000 that most people in the room believed was unbuildable. Remember, when searching through the tax sale listings for hidden gems, remember that many of the properties that go to the sale are there for a reason. Many are unworkable, unbuildable and may even be left overs from prior sales.
To target a gem, we seem to think that land may be the valued commodity. Even though we would rather have a home, the reality is that most homes that are any good get redeemed prior to the sale. Larger tracts of land however can be a gold mine to the right developer. It may take a while before you are able to resell it, so if you do buy land, you better get it cheap enough that you can afford to pay the taxes and maintenance on it.
From last weeks work on this project, I can tell you that these sales take a lot of effort. But if you are patient and do your homework they can really pay off. So good luck and happy hunting. Remember when you finally do get your dream property, Daniel Realty & Investments will be instrumental in helping to sell your real estate for top dollar. Please call of visit https://www.jdanielrealty.com/
