What is a Tax Sale?

There are a lot of different ways to purchase real estate, including the traditional method of hiring a real estate agent and following them around from property to property to inspect it until you find what you're looking for. And for most people, this is how they buy their home or their land. This is the traditional method in which you know what you're getting, there's a process in place to ensure title checks are done, and everything is above board.

However, in the heyday of home flipping, when you could virtually buy a house and resell it within a week with just a little bit of elbow grease and some new paint, homes were being sold and bought sometimes virtually unseen through auctions. There are several types of options available to buy property or real estate, including online auction sites such as eBay and well as other lesser known websites in which you are buying the property directly from the owner by bid.

But there is also a lesser-known method that is completely government sanctioned called a tax sale. When a property owner falls behind in their property taxes, there are several steps that are taken. The county in which the property sits has a tax collector's office that will attempt contact with the property owner through certified mail in order to get the property current on its taxes. If the property owner fails to bring their tax bill current, the property is then sold in a tax sale for the past due taxes. The tricky part of a tax sale is that unlike a traditional real estate transaction or even a property auction, what you are paying for with your winning bid is the tax bill that is owed. The owner of the property remains the owner, at least technically, for another year. This person has up to one year to repay the back taxes that you paid, including the interest and fees. If they fail to do this, which many people do, you can then begin the foreclosure process on the property and take ownership. Clearly this is not a clear cut method to obtain property, however it is an attractive method to many people because you are basically gambling that the property owner will not be able to bring taxes current and you will be able, for your small investment, be able to take possession and walk away with a hefty profit.

In the very worst scenario, you get repaid what you invested and you walk away to make another investment.
If you're considering a tax sale purchase, do your research and fully understand exactly how the process works and what it will take in in to actually take possession of the property you buy. Don't pack up your U-Haul and start trying to move in the next day, because it doesn't work that way with the tax sale. If you're in doubt, consult a tax attorney so you fully understand the process before you bid.