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What are Government Tax Sales?

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  • Written By: Ken Black
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 April 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Government tax sales are one of the most misunderstood, but highly lucrative, types of real estate sales in existence. Most government tax sales performed in the United States are carried out at the local government level. In most cases, tax sales result from delinquent property taxes, which are assessed at the local level. However, the IRS can also take control of property for unpaid U.S. income taxes and sell them at government tax sales.

In most cases, government tax sales will include more than one property. Usually, tax sales are held only after a suitable number of properties have been assembled to collect an adequate number of potential buyers. This ensures competition in the auction process. The more potential buyers there are, the more likely it is that government tax sales will result in a recovery of losses for the government agency.

In all cases, government tax sales must be published through approved methods. In most local cases, this includes the use of the local newspaper to get the word out. It must also be posted in government offices responsible for the sale. This may be the county courthouse or county offices in many jurisdictions. Further, government tax sales can usually be found advertised online. Checking the newspaper or government Web sites regularly is the key to keeping up with all sales.

Once a purchase has been made at a tax sale, property is transferred to the buyer. However, in most cases, the purchaser does not clearly own the property at this point. The original landowner has the right to purchase the property back for the amount the purchaser paid, plus any fees and interest. In many cases, the interest rate is 18 percent. Tax sales may be done by auction or by luck of the draw.

The ability of the original landowner to purchase the property back is what makes government tax sales so lucrative for the purchaser. No matter what, he will get some sort of great deal. Either he will receive an 18 percent APR on their investment or he will receive a property for a greatly reduced rate. That property can then be turned around and sold for a profit or kept for personal use.

For those who plan on using government tax sales for real estate purchases, there are a couple of things to keep in mind. Before making any improvements to the property, it is best to wait until the buyback option for the previous owner has expired. Otherwise, that owner is under no obligation to pay for any of those improvements, which could result in a substantial loss. Also, properties will come as-is, meaning if they are in disrepair, it will be up to the new owner to make repairs.

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