This question applies to all states. Note that in Texas, you can purchase houses with cash or money orders in all counties at a “sheriff’s sale”…usually on the county courthouse steps…when a person fails to pay property, school, etc taxes on the house. It’s my understanding that you CANNOT tour the house in most cases before purchasing it. That of course means you are taking a bigger risk — but the bigger the risk, the bigger the reward.
However can anyone recommend some tips to minimize risk?
Here are a couple ideas I thought of…
Do a history check on the house…e.g. find out why it’s being sold at auction, and see if you can tell why no one has purchased it or done anything with it so far [some of this would be assumptive if not all data is available]…
Peek through the windows & take a look at the outside structure of the house — assuming its not currently owner occupied
Do a proper lien check on the title with the county
Can anyone else think of other ideas on how to cover your butt before making a purchase at auction? Or do you disagree with any of the above tactics?
Kind of basic due diligence. Most people just try to track down the owners and negotiate before the sale. There’s a few articles on this site and you can do most of the due diligence on the checklists.
I’ve bought a lot of properties at Texas auctions. When you can buy a property for simply back taxes, you hardly care since the price is so low. The Tax Assessor’s Office issues a list of all the properties to be auctioned about 3 weeks prior to the sale date. I peruse that list, select the properties that sound interesting and then LOOK at every single one of them. It helps to know the areas, too, which happens over time in this business.
Tax lien sales eliminate most prior liens against the property. You will get the property free-and-clear if the owner does not redeem within the alloted time frame. There are exceptions. One woman out-bid me for a property not realizing that she would still owe an additional $2500 assessment for back Association Dues that didn’t get eliminated by the sheriff sale.
BTW, I particularly like Texas because I can earn 25% every six (6) months or less. If you work a larger city like Austin or San Antonio, you know that 97% of the time, the owner will redeem his property. By law, he has to repay you (via the Tax Collector) what you paid PLUS 25%. I’ve had that happen in as short a time as 3 weeks. If the owner doesn’t redeem, you wind-up owning the property 6 months plus one day after the Sheriff’s sale. I’ve got some nice rental houses that way. You have to do your homework and know the rules. I’m intentionally not complicating this brief discussion by talking about homesteaded properties or Ag-registered properties.
I arrange with the Sheriff ahead of time to be able to write a personal check to cover my bid or to provide the payment through one of my self-directed IRAs. The title is “clouded” for about a year meaning that no title insurance company will issue a policy until after about a year from the date of the Sheriff sale. That means, don’t do this with the idea you’re going to flip the property.
This is a cash-on-the-barrel-head business. Be prepared accordingly.