How to Research Tax Delinquent Properties

Tax sales are a form of real estate sale that municipalities put on to recover unpaid property taxes. When considering buying a tax sale home, it’s important to understand that not every house and parcel of land on sale is worth a purchase. Some are absolute bargains, and others hold less value from an investment perspective. 

Every investor should learn how to research tax-delinquent properties. This skill will help you differentiate between what’s worth the investment and what isn’t.

Here is how to research tax delinquent properties.

Understand the Local Tax Sale Process

Municipalities decide how to run a tax sale. Research the local rules and requirements that your local government uses to manage tax sales in your area. Ask about the redemption period and find the answers to any other questions you may have. Ensure you’re fully informed before bidding.

Know Where to Check for Listings

Make sure you know where to look for tax delinquent property listings. They are often on municipal treasurer or local government websites. Tax sale websites offer you the listings and more information that may be worth signing up for.

Search for Their Market Value

Tax sales will drive up the minimum bid amount much higher than indicated. Most buyers want tax delinquent properties at a bargain. If the bid price starts to reach the property’s assessed value, it may be time to back off the bidding. Know a home’s market value.

Read Through Listings Carefully

Take the time to read through tax sale property listings carefully. Make a note of any photos you have and other property info. Look at the location. Measure your listings against your expectations, desires, and ultimate goal for why you’re purchasing a tax sale home.

Check Public Records for Property Information

Assess property records to verify prior ownership. Check for any legal disputes, complications, or past news stories or events tied to the property that could impact its value as a home or investment asset.

Confirm Zoning and Land Use

If you intend to do something different with a tax sale house than what it already is, verify the local zoning regulations. Investigate whether it’s residential, commercial, or agricultural. See what rules are applied to the property. Note what permits, if any, are required to make changes.

Conduct a Title Search

A title search will inform you of any liens or encumbrances on the property. If there are, an investor must make the call on whether it’s still worth it to bid or not. Ideally, you want tax-delinquent real estate with no liens or encumbrances.

Analyze the Tax Sale Home’s Physical Condition

Although you cannot complete a home inspection before purchasing, you can conduct a drive-by inspection. From a public place, such as a road or park, look for any visible issues, such as structural damage or neglect.

Evaluate the Tax Sale Home’s Location

Consider its location and proximity to amenities, schools, and transportation. Assess the area’s desirability related to your interests in the property. Look at neighbouring property values to measure against the market value of your tax-sale home.

Budget Intelligently for a Tax Sale

Even if the tax sale house looks perfect, you never know what the inside looks like or the property’s true value. Remember to budget for potential renovation costs and maintenance, legal fees associated with an eviction, unpaid utility bills, potential liens, environmental cleanup, and more.

Consult with a Tax Sale Lawyer

Seek legal advice from a lawyer with experience and knowledge in tax sales. They can answer any questions about what you’ve already discovered about a tax-delinquent property, confirm property rights in a local tax sale, identify liabilities, and assist with legal disputes after it’s yours.

Consider a Tax Delinquent Property’s Profitability

There are many ways to gauge whether a tax-delinquent property will be a profitable venture for you. As you need the full extent of information to declare with certainty if a tax sale home is profitable, here are some of the costs and financial considerations to make.

Cost of potential legal disputes relating to ownership if anything comes up in your title search. Repairing potential structural damage or vandalism inside the home, including upgrading or repairing electrical, HVAC, and plumbing costs. How high are you willing to bid based on your estimate of its long-term worth?

Inspect the property taxes beyond the delinquent amounts to determine if future property taxes are manageable. Do you intend to turn around a tax sale house quickly for profit? Look at present market volatility and what it could mean for selling.