For those who don't know much about tax sales, bidding on a property you know little about can seem scary. In a tax sale, you're buying a property as-is without inspection and guarantees from the municipality controlling the sale.
This might feel risky, but many investors have gained wealth with the proper knowledge and preparation. If you're new to tax sale homes, here's how to research properties before a tax sale.
Carefully Read the Tax Sale Listing
Review and note all the details you can from the tax sale listing. There may or may not be pictures of the property or land alongside a small collection of details. This is where you start your research.
Don't Bid Without Research Done
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Always research any tax delinquent properties before bidding. A blind bid can be costly because not every opportunity is a winning investment. Conduct thorough research to ensure you're as informed as possible about your purchase. Fortunately, you can do this online.
Do an Online Search for the Address
See what comes up when you research. See the location, size, previous sales history, and other details that pop up. Many searches come up with very little, but you may discover some interesting facts about a tax sale house. These facts could persuade you to bid or discourage you from bidding.
Define Your Research By Why You're Buying
A tax-sale home can be purchased with several purposes in mind – to live in, to flip, as an investment, to use as a rental, etc. If you know what you want to use the property for, you know how to research it.
For example, a rental property should be in demand in the area. As an investment property, you want to make sure it will appreciate over time. Many factors go into whether or not a tax-sale property has value.
Determine a Tax Sale Home's Market Value
A tax sale listing may already have an assessed value included in the details. Even if it does, this doesn't necessarily mean that's the market value. It's essential to research similar properties in the area and city.
Consider what similar houses have sold for and apply this knowledge to the maximum value you would give a specific tax sale house. This will tell you how much you would bid on it.
Visiting the Property Is Recommended
While you have no right to inspect a house or walk onto the property uninvited, you can visit a tax sale house that is up for grabs. You can observe it from a public area, such as the road.
It's also a chance to examine the surrounding neighborhood, inspect the exterior condition, and determine if there are issues, such as noise or nearby construction, that could affect the enjoyment of the property. You may even knock on a neighbor's door for more information.
See If There Are Occupants
Some tax-sale properties are empty plots of land, while others are abandoned homes. Sometimes, the previous owner lives there. This isn't really a problem, but evicting them becomes a priority once you legally own the property.
You might need to consult a real estate lawyer to learn how to handle this legally. Although it can be unpleasant, you have the right to do so.
Always Conduct a Title Search
A title search will let you know if any liens are on the property that you should know. Most liens and mortgages are eliminated during a tax sale. What usually remains are Crown interests.
A title search will show how easy or complicated owning a property is. If you own a property with a Crown lien, this transfers to you and becomes something you must deal with once you assume ownership.
Consider Speaking to a Real Estate Agent
A real estate agent or appraiser can do additional research into a tax sale home and outline some things you weren't previously aware of. If you're serious about purchasing a specific home, especially to use more or less immediately to live in, a real estate agent can provide peace of mind.
A home inspection is still strongly recommended to get a full picture of what you're dealing with. However, that's only possible after you own the land.
Set Aside Some Money for Issues
Even after all your research, expect to find something wrong with the property—a lien or issue you weren't aware of, a house in bad shape needing updates and repairs, or damage that needs fixing immediately.
If you have the funds ready, these problems can be solved, and then you'll have the property you expected from the tax sale.
