There are two types of tax sales: those held by auction and those by public tender. By public tender, bids are mailed in, and investors submit their highest bid without knowing the other offers. Some municipalities hold tax sales by auction, which is much faster for investors. Investors must know their budget and what they’re willing to part with and be educated on the properties they want to bid on.
Weeks before the tax sale auction, you can go online and review listings for the properties up for auction. These listings may or may not have limited photos of the outside. In addition, they may have the starting bid amount, the assessed value of the property, and other details you may want to know.
Let’s discover how tax sale auctions work.
Multiple Properties Are Up For Grabs
On a tax sales auction day, note where and when it is held. You must attend an auction in person. It is not virtual. A tax sale auction will have multiple properties to bid on. You may want to be prepared to bid on a few, knowing that most investors will not walk away with their top pick.
All Properties Are Sold As-Is
All properties up for auction are sold as-is. The government does not warranty or represent a property’s value, condition, fitness, absence or presence of environmental contamination, vacant possession, access, or suitability.
Do a Title Search
Complete a title search for the properties you intend to bid on and do so on the same day as the auction. This will help determine any mortgages, liens, or interests on the property that impact your homeownership.
If the property has a Crown mortgage, it will remain after you buy it. Crown liens will also remain. If you discover these in a title search, you must decide whether it’s worth purchasing a tax sale home, knowing that these interests come attached.
The Prior Owner Can Still Recoup Their Property
Until the tax deed is registered on the title that puts the highest bidder’s name on it, the prior owner can still come forward and pay the taxes and fees, and then the property is withdrawn from the auction. If you notice a property you expected is not being auctioned off on a given day, it’s likely because taxes were paid and the house returned to the homeowner.
Bidders Must Register
A tax sale auction is only open to registered bidders. Registering is typically done on the day of the auction and requires a government-issued ID, proof of address, and a host of other documents.
The minimum bid amount combines the outstanding taxes, penalties, interest, and other costs the government wants to recoup. In most cases, bids are expected to drive the price far above the minimum.
Attend and Listen to the Auctioneer
Your auctioneer will read out the rules about the auction and how properties will be sold. Listen closely to how bids are placed. Auctioneers have the right to resolve disputes and errors related to bidding. During or after the sale, they can reopen bidding, cancel a sale, or reoffer a property in dispute.
At an auction, you compete with aspiring first-time homeowners, individual property owners, property management companies, corporations, and even banks. Bids often drive up the cost of buying a tax-sale house far above the minimum. Therefore, you will want to know where your range is for what’s acceptable and what isn’t.
Bids Are Binding
All bids are irrevocable. The successful bidder is legally obligated to complete the purchase. If they cannot pay, they may be disqualified from participating in future auctions, though this is not the case in every municipality.
Come with the money and be ready to buy a tax-sale house. Payment will be required immediately at a public auction. You cannot be declared the highest bidder if you lack funds. Most municipalities request funds in cash, cheques, money orders, or bank drafts.
A Tax Deed Is Registered
After payment is received and the municipality registers a tax deed on the title, you officially become the property owner. At that time, the former owner could not redeem the property. It is within your rights to evict them if they refuse to leave the home.