Should You Consider Tax Sale Real Estate?

Going to a tax sale may be a place to obtain an inexpensive piece of real estate. Is it a good idea?

There are lots of parcels of real estate that end up being auctioned off at the local tax sale. Some houses are being sold for a fraction of what they’d cost on the regular market. First home buyers and investors may wonder if they should try this option as a way of purchasing an inexpensive property.

Due to the downturn in the United States economy, many individuals are having a hard time paying their bills. The housing meltdown and mortgage crisis turned many responsible homeowners’ lives upside down. Individuals have lost jobs or are working for less than previous salaries. Because houses are worth much less than they were a few years ago, selling one’s home to move to a less expensive place is nearly impossible. The result is many people letting their homes go into foreclosure or be repossessed for back taxes. This is unfortunate and can be devastating. On the other hand, being released from a mortgage that wasn’t affordable may be a blessing in disguise. No more pressure about not being able to pay the monthly payment. Moving into a less expensive rental may be a relief. The properties that end up on the auction block may turn out to be opportunities for others looking for affordable bargains. Here are some things to think about:

- Do your homework: When attending an auction, potential buyers must already know all about the place they’re bidding on. They should drive by, check the comps, and take a look inside if at all possible. At the auction, individuals should already know whether they want to bid or not.

- Do the math: Take a look at the structure and make a list of potential repairs. Does it need a new roof? A paint job? Landscaping? New flooring and appliances? Get some ballpark price ranges for these improvements and add them up. When bidding for a home, add the total from the list to see if the house is truly affordable.

- Location, location, location: The old real estate rule of thumb is still as true as ever. Everything can be changed about a property except where it’s located. If it’s a fixer-upper in a great neighborhood, it may be a wise purchase.

- Have finances ready: Buying real estate at a tax sale will be on a cash basis. If a person is the winning bidder, he or she will need to turn over money right away. If they bid, win but still have to go look for a loan, the place will go to the next highest bidder.

- Find out costs for taxes, insurance and utilities: Remember the reason that the former homeowner lost this house? Because they couldn’t pay their bills. It’s important to find out how much property taxes, homeowners’ insurance and utilities will cost in order to make sure it’s financially feasible.

Buying a house at a tax sale can be an economical way to purchase one’s first home or an investment property. Doing one’s homework, adding up improvement costs, and deciding if the location is a good one will help buyers decide if it’s a good deal for them.

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