The collection of delinquent property taxes varies from state to state, each being different. Thus, some of what I say applies to some states and not others.
In some states mortgages and other encumberances remain on the property after the tax sale, the responsibility of the new owner.
Over 90 % of properties that sell at tax sales are vacant land. Vacant land is far tricker to invest in than improved properties. There are all sorts of things that can make land unattractive to potential buyers. Size, topography, lack of road acces, lack of legal access, no utilties nearby, property will not accept a standard, low-cost septic system, zoning that prevents uses people might want, toxic contamination, wetlands that must be preserved, endangered animal or plan habitats that can not be disturbed, neighbors with obnoxious living habits, high property taxes, and there are probably some more.
Improved properties are often very rundown.
There are time constraints in some states. You have to foreclose on your unpaid lien within a short period of time or your lien evaporates--such as 2 or 3 years.
The cost of foreclosing on the liens can make the deals unprofitable, as most properties are vacant land thus are not worth much.
Once you own a property through tax deed, it may be impossible to get title insurance on the property, either yourself or your potential buyers unless you pay for a court action called a "quiet title lawsuit" or else can get all of the former owners to sign a quitclaim deed to you for their interest in the property.
A lot of the properties are far out in the countryside or in the forest or moutains, making looking at them difficult.
Most of the properties or liens scheduled for sale may be pulled off the list before the actual auction, so you spend a lot of time looking at or researching properties and find little upon which to bid. Here in Alameda County, where I live, it is typical for the original list to be over 300 properties and then only a dozen or fewer actually sell.
Doing research on properties can be very time-consuming, even just doing research in the county offices.
If you are after the properties, most liens do not lead to a deed. Perhaps 2% or so. Maybe fewer. For what I call good properties--improved or valuable vacant parcels--the % is even lower. Perhaps one in 200 to 1 in a 1000, perhaps even lower.
There are a lot of lawsuits instituted by former owners who are unhappy to lose their properties. Before I started investing in tax sale properties I was only involved in one lawsuit--my divorce. Since then there were 3, with threats of lawsuits in a couple of others.
If you buy an improved parcel, you may have to evict the occupants, who may be the former owners. It is not unknow for such people to tear up or burn down the house befofe leaving.
When you are dealing with an auction format, it is easy to mistakenly bid upon the wrong property or lien. It requires intense concentration to be sure you are bidding upon that which you want.
The improved properties are rarely in nice neighborhoods.
Vacant lots in cities are almost always in bad neighborhoods or marginal neighborhoods. Not always true, but typically so.
Bidding is easy, just keep upping the price. You can thus easily overpay for a property.
There can be very great competition for the good liens and good properties. Thus, you might work hard and get nothing for your efforts. I have often bought nothing at tax auctions.
Most sales are all cash at the sale. Thus you have to have a lot of money to buy stuff. No leveraging when you buy.
Since you didn't ask, I won't tell about the positives.
Oh, I forgot. If a lien-holder is not properly notified of the sale, their obligation remains against the property when you buy it.
Not all liens are wiped clean off the property. In many states state liens survive, as may county or city ones.
If there is an easement over a property you buy, it is possible that you cannot make use of the property at all.
In many cases, ownership of the mineral interests under or on a property may be separated from the surface rights and you don't get them buying at the tax sale.
jinvestor--------
The collection of delinquent property taxes varies from state to state, each being different. Thus, some of what I say applies to some states and not others.
In some states mortgages and other encumberances remain on the property after the tax sale, the responsibility of the new owner.
Over 90 % of properties that sell at tax sales are vacant land. Vacant land is far tricker to invest in than improved properties. There are all sorts of things that can make land unattractive to potential buyers. Size, topography, lack of road acces, lack of legal access, no utilties nearby, property will not accept a standard, low-cost septic system, zoning that prevents uses people might want, toxic contamination, wetlands that must be preserved, endangered animal or plan habitats that can not be disturbed, neighbors with obnoxious living habits, high property taxes, and there are probably some more.
Improved properties are often very rundown.
There are time constraints in some states. You have to foreclose on your unpaid lien within a short period of time or your lien evaporates--such as 2 or 3 years.
The cost of foreclosing on the liens can make the deals unprofitable, as most properties are vacant land thus are not worth much.
Once you own a property through tax deed, it may be impossible to get title insurance on the property, either yourself or your potential buyers unless you pay for a court action called a "quiet title lawsuit" or else can get all of the former owners to sign a quitclaim deed to you for their interest in the property.
A lot of the properties are far out in the countryside or in the forest or moutains, making looking at them difficult.
Most of the properties or liens scheduled for sale may be pulled off the list before the actual auction, so you spend a lot of time looking at or researching properties and find little upon which to bid. Here in Alameda County, where I live, it is typical for the original list to be over 300 properties and then only a dozen or fewer actually sell.
Doing research on properties can be very time-consuming, even just doing research in the county offices.
If you are after the properties, most liens do not lead to a deed. Perhaps 2% or so. Maybe fewer. For what I call good properties--improved or valuable vacant parcels--the % is even lower. Perhaps one in 200 to 1 in a 1000, perhaps even lower.
There are a lot of lawsuits instituted by former owners who are unhappy to lose their properties. Before I started investing in tax sale properties I was only involved in one lawsuit--my divorce. Since then there were 3, with threats of lawsuits in a couple of others.
If you buy an improved parcel, you may have to evict the occupants, who may be the former owners. It is not unknow for such people to tear up or burn down the house befofe leaving.
When you are dealing with an auction format, it is easy to mistakenly bid upon the wrong property or lien. It requires intense concentration to be sure you are bidding upon that which you want.
The improved properties are rarely in nice neighborhoods.
Vacant lots in cities are almost always in bad neighborhoods or marginal neighborhoods. Not always true, but typically so.
Bidding is easy, just keep upping the price. You can thus easily overpay for a property.
There can be very great competition for the good liens and good properties. Thus, you might work hard and get nothing for your efforts. I have often bought nothing at tax auctions.
Most sales are all cash at the sale. Thus you have to have a lot of money to buy stuff. No leveraging when you buy.
Since you didn't ask, I won't tell about the positives.
Good Investing*********Ron Starr***********
jinvestor--------------
Oh, I forgot. If a lien-holder is not properly notified of the sale, their obligation remains against the property when you buy it.
Not all liens are wiped clean off the property. In many states state liens survive, as may county or city ones.
If there is an easement over a property you buy, it is possible that you cannot make use of the property at all.
In many cases, ownership of the mineral interests under or on a property may be separated from the surface rights and you don't get them buying at the tax sale.
Good Investing************Ron Starr********