Tax Deeds: The Information You Need to Start Bidding

Tax deeds are yet another way an investor can make money in real estate markets that have been depressed or even flat across most of the country. Although foreclosure is still a real possibility for many Americans, that doesn't mean there aren't some unique investment opportunities out there. Buying properties out of the hands of homeowners who failed to pay their taxes is one such opportunity. As with any investment, laying down your money on one of these homes carries a certain amount of risk. The potential reward, however, can make these types of investments worth it. Here is some information you'll need to get started.

Sales

In order to invest in tax deeds, you'll need to attend a sale. These sales are put on by the local tax collector, generally speaking, and are brought to the public when the holder of the lien or certificate notifies the collector that the homeowner has passed their allotted time to pay the back taxes. At that point, the deed is the certificate holder's to sell and it is the public's right to bid on the home. These are popular investment opportunities because they represent a chance to own a home for much less than market value. While the management of these sales differs depending on your community, notices are generally sent out by the local clerk of court well in advance. Check your local newspaper for listings.

Registration

Many communities insist that investors planning to attend the tax deeds sale pre-register for their spot. In other communities, no such registration is necessary. There may also be rules that govern whether or not you have to be physically present to bid on the property for sale. This clause is in place to prevent a local sale from turning into a nationwide bidding war. Still, if you want to bid on a property that is out of your travelling distance and they require physical attendance, you may be able to get someone to sit in your place for a fee. This is not an uncommon strategy for investors who don't want to limit themselves to local properties.

Payment

Usually the local government wants to collect the money quickly. When you are the winning bidder, don't expect to have a lot of time paying for these tax deeds. Many communities, in fact, demand that the buyer put down a small deposit at the conclusion of the sale. At that point, the time varies as it pertains to how long you'll have to pay up, but 24 hours is not an uncommon time frame.

Investors need to be informed and prepared before attending a tax deed sale. Because each local government has its own rules governing tax sales, you need to check with the local clerk or tax collector's office for complete information.