What are Tax Deed Sales?

Tax deed sales are sales of real estate which are held to satisfy tax debts, classically for property taxes, although nonpayment of income taxes can also result in a tax deed sale. The goal of a tax deed sale is to recover enough from the sale of the property to pay off the tax debt. People can sometimes pick up properties at very affordable prices at such sales, using those properties as investments or residences. Listings of regional tax deed sales are usually available from the government office where deeds are registered.

When a property is brought to a tax deed sale, it is the end of an often lengthy attempt to recover unpaid taxes from the property's owner. Nonpayment of taxes usually results in a series of threatening letters, and an eventual visit from a tax official who discusses the situation. If the taxes remain in delinquency, a lien will be placed on the property so that it cannot be transferred or sold, and the owner will be informed that the property will be listed in a tax deed sale.

It is possible for owners to redeem their deeds at a tax deed sales by paying the required amount. If the owner cannot afford to do this, anyone can bid on the property. The maker of the winning bid will be awarded the deed to the property. Usually, people pay cash at tax deed sales. Some agencies allow bidders to put down 10% of the purchase price on the day of the sale, with the remainder being due within a short period of time.

Properties offered at tax deed sales are usually not open to inspection, which can make them risky buys. Listings of addresses are sometimes available in advance of the sale for people who want to drive by the property, but unless the property owner gives permission, the property cannot be examined more closely. The as-is status of such sales is important to keep in mind, because if a problem develops, the buyer has no recourse. It pays to do some research about the zoning of a property offered in a tax deed sale, and to see if problems like an inability to get permits led to the failure to pay the property taxes.

People who are interested in purchasing property this way should be aware that in addition to tax deed sales, some agencies hold tax lien certificate sales. In a certificate sale, the winning bidder pays the taxes, but does not take possession of the property. The property owner must repay the winning bidder or forfeit the real estate. The advantage to certificate sales is that the holder of the certificate wins either way. If the property owner repays the sum, the certificate-holder benefits from the high interest rate attached to the repayment plan, and if the property owner fails to repay, the deed defaults to the certificate-owner, allowing him or her to take possession.