subject: The Process Of Tax Sales [print this page] It is true that tax sales can be a great way to purchase an investment property. There is a chance that the property will be offered at a discounted rate and that the process will go smoothly. However before you take a look at your first property, make sure you understand how you should go about bidding and what it means if you win. In some cases, the person losing the home has the ability to buy it back after three years. You don't want to purchase a home or other piece of real estate only to find that you could end up being forced to sell it a few years down the road.
How to Bid
If you want to bid on tax sales properties, you need to register an account. In most cases, there are no fees associated with the creating an account, however, you must be able to show that you can afford the house that you plan to bid on. Bids on the tax sales property are often done online and a window of time is made available for each one. As individuals place their bids, they can see what other individuals are bidding as well, making for a competitive environment. The person with the highest bid wins.
The Catch
One of the most important things to note about tax sales is the fact that when you purchase a property from the auction, you do not receive full ownership of the house or building. The original owners have up to three years to reclaim their property by paying back the money owed along with some interest, usually around 5%. If the house was abandoned or damaged, the original owner only has eighteen months to come back and reclaim it, paying the amount due plus interest.
How the Investment Works
Tax sales properties are not homes that the buyer is going to move into. Instead, the taxes are paid and now the original owner owes the wining bidder the money plus interest. This investor has two ways to make some money. The first is to have the original amount paid back with interest. This is the most basic, straightforward way to get the original investment plus some gains paid back. About seventy five percent of the time, this is the way things turn out. On the other hand, if at the end of three years the original owner of the home cannot pay back the money, he or she may fail to redeem the property. This means that the investor (after a lawsuit and often a lot of expensive legal work) owns the property.
