Do you want to know something shocking?
Every day, properties worth hundreds of thousands of dollars are sold at tax sales, sometimes for just a fraction of their value.
But before you start dreaming about incredible deals, let me share something crucial: while tax sales can offer mind-blowing opportunities, there are some serious hidden risks that could devastate your investment if you don't know what you're doing.
How Does A Tax Sale Work?
In this guide, I'm going to walk you through exactly how tax sales work, how to find these properties, and most importantly, how to avoid the dangerous pitfalls that most people never see coming.
Plus, I'll share a unique way to buy these properties where you never have to compete with another bidder.
Here's how tax sales work: When someone doesn't pay their property taxes for three to four years, the government steps in to collect.
And here's where it gets interesting.
The bidding starts at just the taxes owed – typically about 15% of the home's value.
Think about that for a moment.
On a $400,000 house, you might be looking at a starting bid of just $55,000 to $60,000. Exciting, right?
But let's talk about how to approach these sales the smart way.
First, you need to get your hands on a tax sale list.
It's surprisingly simple – just Google your county name, state, and “tax sale list.”
For example, if you search “DeKalb County, Georgia tax sale list,” you'll find the Tax Commissioner's website with a link to the current list.
Here's your first insider tip: When you see that list, don't get too excited by the number of properties.
A list might show 100 properties, but here's the reality – about 90% of them will never make it to auction.
People catch up on their taxes at the last minute or file bankruptcy to stop the sale.
You're really looking at maybe 10 or 15 properties that will actually sell.
About four days before the sale, pull that list again.
You'll find it's shrunk dramatically.
Now it's time for the real work – physically inspecting these properties.
Here's where it gets interesting: Let's say you spot an occupied property.
In one sense, that's good – especially in northern climates where a vacant house might have frozen, burst pipes.
But here's the catch: if it's occupied, you've got to deal with the occupants.
That could mean Cash for Keys, setting up rent collection, or going through an eviction that could cost you $10,000 to $12,000 and take six months.
Let me share a real success story from a friend of mine.
He recently bought a house at tax sale for around $2,500.
Here's the kicker – it had tenants already paying $800 a month in rent.
He worked out a deal with them, and in just three months of rent payments, he'd paid for the entire house and had money left over.
Pretty amazing, right?
But now, let me give you a serious warning that could save you hundreds of thousands of dollars: Never, ever buy commercial properties at tax sales.
I'm a real estate attorney, and let me tell you about a famous case that perfectly illustrates why.
There was this case in Pennsylvania called Mirabili Beverage.
These guys thought they got an amazing deal on a paint factory at a tax sale.
But as soon as they bought it, the EPA contacted them about open barrels of chemicals that needed proper disposal.
Even though they backed out of the auction before getting the deed (in Pennsylvania, you buy in September but don't get it until April), they still had to pay over $400,000 in cleanup costs for a property they never owned.
When you're looking at properties, drive by them. Check the roof—is it straight and flat, or is it bowed? Are there holes from fire damage?
Are there any blue tarps covering problems? Look for signs of smoke under the eaves.
Remember, if someone couldn't pay their taxes for three or four years, they probably weren't maintaining the property either.
Be bold—knock on doors, talk to occupants, and look in windows as you walk up (don't be creepy about it; just be observant).
You'd be amazed at what you can learn just by asking questions.
Are they the owner? A tenant? What problems does the house have?
Here's another crucial tip about tax sales: you need cash.
No mortgage companies will finance these purchases.
Payment is typically due the day of the sale or the next day.
Set your limits before you go in and stick to them.
If your limit is $100,000 on a property, don't bid $101,000 just because you got caught up in the excitement.
After purchase, you'll likely need to deal with title issues.
Budget $4,000 to $5,000 and four to six months for what's called a quiet title action.
There's a company called Tax Title Services that often offers title insurance – if they won't insure it, that's when you need that quiet title action.
But here's something really exciting I want to share.
There's actually a better way to buy these properties – one that lets you avoid all the competition.
My friend invented a method to buy properties that are still available after the tax sale.
We're talking about tens of thousands of properties you can get just by paying the back taxes due.
No competitive bidding, no registration hassles, and no driving around looking at 100 properties to bid on two.
If you want to know more about buying properties at tax sales, start by doing a dry run.
Pull a list, research some properties, and watch a sale.
See what things actually sell for.
Knowledge isn't just power in this business – it's profit.
