Tax Sale Question

[diesel]

Hi all.  I am looking at different real estate investment strategies and I have a question.

Can properties that have back taxes and are on the list to be sold at auction be paid off up until the day of the tax sale?
More specifically, could I buy a property with back taxes from the owner, pay the taxes off, and own the property?

I know you can invest in tax liens etc. but I was looking at the details for my county's next tax sale.  The whole list of properties is available but the county doesn't plan to hold the sale until late 2021 (assuming because of covid, etc.)  I started wondering if the above question would be possible or if there is a deadline for such a transaction. i.e. once the property is listed on the sale list it is beyond the time allowed to pay it off and has to be auctioned.

If anyone has any experience I'd love to hear from you!

[SndcxxJ]

I am not familiar with your particular jurisdiction, but in California in my experience, you can interrupt a foreclosure for whatever reason up to the day before the sale.  I would even be willing to bet with a lawyers assistance you can interrupt a sale the day of the sale.
My experience is not in tax sales but in mortgage notes and subsequent foreclosures but the process is the same.  When foreclosure sale date comes up, I would let the trustee know to proceed with the sale the following day or if I made progress in negotiations with the trustor I would delay the sale for a week or month.
What appears to me to be a great real estate strategy is to contact those people who are near foreclosure and offer to purchase the property from them as is and be able to close immediately.  You might do this in a way that assumes the tax debt or it is paid in escrow.  In California, I believe once I start filing foreclosure paperwork the person getting foreclosed on starts to get calls from quite a few buyers so it isn't a walk in the park.

[Fishindude]

The way it works here, is when people get too far delinquent on their taxes, the property gets listed in a tax sale auction.
They have an open door, open bidding system so you bid to purchase those properties.
You typically have to pay the county your full bid amount by certified check before end of that business day.
The successful buyer must then pay all of the taxes current pretty quickly.
The county holds his bid amount above and beyond the taxes.
The original property owner then has 12 or 24 months (can't remember) to repay the successful bidder back his bid amount, the taxes he paid, plus interest on all that money or the property is transferred to the successful bidder.

Anytime you bid on something like this it is best to first pay for a title search to see if anyone has liens on the property.
And don't start doing anything with the property (spending money) until the original owners time has expired and title gets transferred to your name.

[diesel]

Thanks for the replies!  I've done some digging in my particular county and it seems you are both right on.

@SndcxxJ the strategy you mentioned is exactly what spurred my thinking and this post.

@Fishindude it sounds like you explained the process in my county exactly.  I do have a question about the process though.  Say the owner does get the money to pay for the property and penalties during that redemption period.  From my understanding they are paying the money to the "buyer" that won the auction.  What happens to the money that the county collected from the buyer and was holding over the tax amount?  Does the county just get to keep the money?

So if I'm understanding it correctly, in order for the person being foreclosed on to stay in their house, they would need to sort of "re-buy" it from the auction winner for the bid + taxes and penalties...and the county just keeps the original bid almost as a "cost of doing business"?

Sorry if I'm not making sense or over simplifying...I'm just trying to wrap my head around it all.

Thanks again!

[Fishindude]

If the original delinquent owner somehow gets their act together and is able to pay things back to retain the property, they have to pay back EVERTHING including what went to the county.
The successful bidder gets ALL of their money back, plus interest.

[diesel]

If the original delinquent owner somehow gets their act together and is able to pay things back to retain the property, they have to pay back EVERTHING including what went to the county.
The successful bidder gets ALL of their money back, plus interest.

I think I'm following but I'm just a little unclear on one thing: the money from the winning bid that the investor paid to the county.

For example.  A house has 10k in back taxes and gets put up by the county for tax auction.  The investor goes to the auction and wins the house for 50k.  He writes a check to the county for 60k (cost of the house and the taxes owed).  The county pays the 10k in taxes and holds the 50k.

During the redemption period, the original homeowner gets their act together and comes along.  They write a check to the investor for...lets say 70k.  That covers the bid, taxes, and interest. 

Now the owner has their house back and the investor got their money back plus interest.  My question is what happens to the 50k that the county was holding over the taxes?  Do they keep that?  Was it part of the check the owner wrote the investor? (Meaning the check the owner wrote was really only 20k out of pocket...taxes and interest - the bid)  Or does the investor get the 70k from the owner + the 50k bid they won the auction with...for a total of 120k.

I'm probably making this harder than it is but I haven't been a part of one of these before.   Thanks for bearing with me! 

[Fishindude]

I think I'm following but I'm just a little unclear on one thing: the money from the winning bid that the investor paid to the county.

For example.  A house has 10k in back taxes and gets put up by the county for tax auction.  The investor goes to the auction and wins the house for 50k.  He writes a check to the county for 60k (cost of the house and the taxes owed).  The county pays the 10k in taxes and holds the 50k.

During the redemption period, the original homeowner gets their act together and comes along. They write a check to the investor for...lets say 70k.  That covers the bid, taxes, and interest. 

Now the owner has their house back and the investor got their money back plus interest.  My question is what happens to the 50k that the county was holding over the taxes?  Do they keep that?  Was it part of the check the owner wrote the investor? (Meaning the check the owner wrote was really only 20k out of pocket...taxes and interest - the bid)  Or does the investor get the 70k from the owner + the 50k bid they won the auction with...for a total of 120k.

I'm probably making this harder than it is but I haven't been a part of one of these before.   Thanks for bearing with me!

There is never any transaction between the original owner and the auction winner.
The original owner must settle all of this debt with the county, then the county reimburses the auction winner everything he has spent plus interest.
Only thing the county gets to keep is some delinquent fees for their troubles.

[diesel]

That makes sense.  i didn't see that before.  Thank you so much!

[Fuzz]

This varies highly by state and county.

But my general expectation is that the person purchasing the lien pays the county. The homeowner then has some statutory period to pay off the lien by paying the county the amount of the lien, plus interest and fees. The county then issues the check for the redemption amount including interest to the person that paid the lien.

I am aware of one state where it's illegal for the lienholder to contact the owner/debtor directly.

If you're talking about an auction where you bid above the amount of the lien, you might be in Georgia, which is really different than what I am familiar with.

[Sibley]

In some counties, the amount paid would include the back taxes.

IE, property has $10k back taxes. Sells at auction for $50k. The buyer pays $50k. Done.

[Duke03]

Where I live if you buy a property at auction due to back taxes even though you take possession of the property the owner who owed the back taxes has 12 months to come up with the money you paid at auction plus a heavy interest rate.  You can't refuse the money if they have it and thus must return their property.  A buddy of mine buys quite a bit of these house's like this.  Surprisingly enough about 75% of the people do end up buying them back.  He still makes money, but would rather keep all the ones he buys.