There are many different ways to invest in real estate. The more common known due to some of the DYI shows on TV are the rehabbers/flippers and the income/rental properties.

Another way to invest in real estate is tax sales.

Tax sales are not for everybody and before you consider attempting to buy a home through a tax sale make certain you educate yourself through local connections like your local real estate professional or your real estate investment groups.

Tax sales are auction types of sales and each state or county has different rules everybody must adhere to. The one example I will give is the one I am familiar with but you need to familiarize yourself with the rules that are within your state or county.

Because the tax sale I am familiar with is an open auction, every bidder needs to register and must have a sufficient amount on deposit in an account with the local tax entity having the tax sale. You must be able to pay in full at the end of the auction. You will not be able to go “to the bank” to withdraw the funds.

The tax sale will have a minimum bid due on each house that will cover all outstanding taxes, penalties, and special assessments presently due on the parcel plus Administrative Cost which can vary.

There is, with every auction, a list of homes that are currently on the auction block and this list will change even the day of the auction. The home you might have your eye on might not be available any longer. The list is in many cases available online for you to look at and to inspect. Also, before you decide to bid on any home make sure you are doing your due diligence. Drive by and research the home every which way you can think of, and you might go as far as having a title search completed to find out if there are other issues that may surface later. Many times what you will not be able to do is go inside the house. Many of the houses may still be occupied.

One thing to consider before buying a house at a tax sale is that within many states there is an owners right of redemption period. It means that an owner has a set amount of time to pay you, the buyer, back the money you paid plus interest. In the counties I am familiar with the owner has 12 months to redeem the property and during that time you as the buyer should not make any updates or repairs to the house. You have basically paid for the possible right to own the house but until the redemption period is over you are not the owner of the house.

When you are looking for more information on tax sales or real estate investing contact the Settles Team.