Skip the Tax Sale – Get Better Properties, Faster!

 

How in the world do you get tax sale properties if you skip the tax sale itself?

Easy – deal with the owner of the tax sale property before it’s lost to a tax lien or tax deed.

Stage 1 – Tax-Delinquent Property

When properties first become tax-delinquent, that fact alone does not really indicate the kind of motivated seller we’re looking for.

However, it can be the first publicly available clue that a property is in trouble and heading for an eventual tax foreclosure.

As always, we can eliminate most properties from our sights because they have a very low assessed value, and are therefore not worth buying at any price.

At this stage we will usually also ignore owner-occupied properties where the owner address matches the property address.  If there are still too many properties on the list to begin tackling (this can happen in larger counties), we’ll just start with the out-of-town owners.

We can further reduce our list by checking for a recent mortgage on the property, if we have the capability to do so.

At this point, we’ll mail a postcard to each property that remains on our list after all these cuts, with an “I Buy Houses” message.  I also try to send a postcard to the property itself, if the owner mailing address differs.  50-100 postcards sent per week, at a cost of about $75, is enough to keep us busy.  We’ll get many calls from these postcards and likely get some deals started.

But we’ll really pay attention to the returned mail.  If we are getting returned mail from an out-of-town owner, there’s a decent chance we can work out a deal with the owner once we find them at their new address, even though the property may be years from tax foreclosure.

Stage 2 – Pre-Tax Foreclosures

It’s nice catching a property early in the process, because we have months or years to make a deal happen before any taxes must be paid.  For that matter, near the beginning, hardly any taxes are owed so the taxes don’t represent a big obligation or deduction from our sales proceeds if we resell the property.

However, nothing gets deals going like an upcoming tax foreclosure deadline.  This may be the date of the tax deed sale, or the expiration of a tax lien redemption period.

At this point we throw all the rules mentioned before, right out the window:

• The are far fewer properties that have made it to this late stage of delinquency so we can pay attention to each one
• Most properties that reach this stage have no mortgage – a bank would have bailed the property if it had a mortgage by now (usually)
• The deadline greatly motivates the sellers – or at least they know they no longer have the luxury of time
• Once the date comes and goes, our chance to do a deal on this property is gone forever.

We’ll go to just about any length to find an owner when we find a vacant property with equity, that is days or weeks from tax foreclosure.  At this stage, we can legitimately offer only $100 or several hundred dollars for a deed to the property to the owner – because it is probably their last chance to get anything out of the property.

If we have cash to redeem the property, that’s all we have to do to and we can take our time disposing of the property.  If not, we need to use a previously created cash buyer list, and find a quick buyer for the property – usually at a deeply discounted price.

Why Avoid the Sale?

Here’s why we usually avoid the sale, and go through the extra effort of dealing with owners:

1.  We do not have to bid against anyone else

2.  We do not have to wait for a sale date to arrive, for a lien redemption period to expire, or for a foreclosure action to take place

3.  Property title does not require a quiet title (a procedure required of tax sale auction properties that delays our sale for months and costs extra).

4.  We can inspect the property

5.  We have no legal obligations of noticing or other actions required of tax sale property

So go ahead – avoid the sale and start getting properties today by starting to work with tax-delinquent owners!