The Reason Most Never Buy a Tax Lien or Tax Deed: Due Diligence

Tax Lien and Tax Deed Due Diligence

When I first started my research into buying tax deeds and tax liens; I found numerous resources that could teach me about the different ways to make money in this area. Some were very valuable and others were not. After about a month I felt I had enough knowledge in the area and I set out to gather the data on an upcoming auction.

My background; I am a tech geek somewhat, and I have developed systems for the mortgage industry that help streamline a process. Several years ago, I built a system that would extract current status of real estate taxes, and provide a paid and/or delinquent status to lenders nationwide. While I was doing this I was amazed at the number of liens, and deeds that were going to auction. Billions of dollars were on the table each year. This is what led me to begin my research into finding a better way to purchase liens and deeds nationwide.

I first had to locate an auction in my area. If I was going to research a property and bid in person I did not want to travel too far. I found that in some areas the auctions were held annually, and in my particular area the next auction would not be held for several months. This extra time allowed me to research the process even more, and begin to develop a system that would save me time and in turn money.

I started with a simple database and through my other systems that I had previously developed I was able to find the auction, gather the information (typically only a Parcel number and minimum bid amount), and then add to the data provided by the county.

This is where I could see a huge benefit. Here are the steps in the process for a typical person looking to buy a tax lien or tax deed.

Locate the County and determine the date of the next auction (not that easy).
Within the county website locate the list of properties that will be included in the upcoming auction. These are represented by a parcel number, sometimes called an APN (again not as easy as it sounds).
Extract this data and move it into an excel spreadsheet.
Go back to the County Assessor's office and using the Parcel Number, extract the value and any other information that may help in determining what type of property it is. Hopefully you are able to determine if it is a land parcel, a condo, a single family home, etc., but as I learned very quickly this is not always the case. 

This process, even after I have been doing it for sometime will require 5 to 10 minutes per parcel.

This is where I think the majority of potential investors stop.

If it takes 5 minutes per parcel number to gather the needed data to begin researching a particular property, and you must do this on all of the parcels in any given auction, the investor simply runs out of time and patience.

For example:
If each parcel takes 5 minutes to copy and paste the data into excel (it could easily take more time than 5 minutes).
A typical auction could contain 400 properties in only one auction
5 minutes x 400 = 2000 minutes
2000 minutes divided by 60 (number of minutes in an hour) = 33 hours
This is 33 hours total that you would spend just getting the data into an excel spreadsheet
Let’s say you can devote 4 hours a day to this process (late at night), because let’s face it most of us have a job too
That is 33 hours total, divided by 4 hours per day = 8 days to just extract the data

Now add in another County that is holding an auction around the same time, and you either double the work or lose the opportunity

I buy tax deeds and have tried to get family members into purchasing them.
They seem to think I should do all the legwork and the buying and then they want to pick the cream and think I should sell it to them for what I gave for it.
I put in time online and at the county I spend two weeks or longer driving and looking to check if what county says or shows pix of is even there.
I will drive and look over the best of them again just before the sale (I have seen a lot of things disappear from the property’s right before the sale, mobile homes ,sheds even large metal buildings ,wells ,carports and a few times they trashed the house or fires took care of the place)
I searched in five county’s last year

Been doing this since 1988.

I buy the lists from the county…saves LOTS and LOTS of time.

These lists are normally available for virtually every tax lien/tax deed sale.

Mine cost about $300 per year.

The list contains ownership, parcel number, delineuent taxex, legal decrription, PPIN or APN Number, everything that is required by state law to be made PUBLICALLY available for the tax lien sale to be done.

Have programs that I have written that take the list and put in a a manageable form that I can work with.

I break it down, look it over, go look at some parcels…not possible to view all when over 12,000 are sold every year…go to the auctin and BID!.

Is it without RISK…NO, NO, NO…you can get burned just as badly here as any other real estate transaction.

Have seen drainage ditches, old 5 X 2000 foot road right-of-ways sold, crack houses, swamp land…you name it…if it is taxable it can and will come up for sale.

DUE DILIGENCE is the ONLY answer.

Good Luck

P.S. If you REALLY want to get into it BIG time go to TX…255 counties and each one holds a tax deed sale the first Tuesday of EVERY month.

Wow, and I thought it was relatively easy. When I lived in Michigan they ran the tax sale notices in the paper and listed names and addresses. All I needed was a Google map to find them and usually I could identify the properties within minutes. Just shows how every area is a little different.

Ever check out any in the rural areas in UP ? its fun finding some of them
Here in oklahoma some county’s still use a plat map from the year 1907 LOL

Exactly, sheesh, sometimes the plat records were so old that you could barely see the lot lines on the drawing. Now take that and then add to it lot divisions, easements, right of ways, power lines and set backs and you can really go crazy.

Talking about tax liens, there are a few things you might consider when you start your tax lien investing. However, tax liens may result to foreclosure. A report made by National Consumer Law Center found a number of individuals who are losing their houses to tax liens.

Talking about tax liens, there are a few things you might consider when you start your tax lien investing.

George, Please educate me…what are some thngs I shold cnsider.

However, tax liens may result to foreclosure.

Yes, in some states if the lien matures to you then you must got to foreclosure to compete the deal.

A report made by National Consumer Law Center found a number of individuals who are losing their houses to tax liens.

Yes, MOST PEOPLE, including real estate agents, DO NOT understand or realize that TAXES are the MOST SUPERIOR LIEN against your property.