What Are Tax Deed Sales?
By Cody McCaughan, Esq.
The Tax Deed process is complicated and often misunderstood
Many homeowner’s who fail to pay their property taxes will eventually lose their property through a tax deed sale. Real estate investors often use these sales as an opportunity to acquire properties for less than market price.
What is a tax deed sale?
A tax deed sale is a public auction in which the government sells a property to recover unpaid taxes. If an owner doesn’t pay property taxes, the government will place a tax lien on the property. If the tax lien is not resolved, the government will likely sell the property at auction to recover those funds.
How does the process work?
Once taxes are delinquent, the tax collector holds an auction to sell what is known as a Tax Certificate. The bidder who wins this auction is given a Tax Certificate which provides them with a lien on the property in an amount equal to the unpaid taxes, plus costs, fees, and interest. To remove this lien, the homeowner must pay off the amount due to the holder of the Tax Certificate. If the Tax Certificate is not paid off within 2 years, the holder can force a public sale of the property. The hope is that the investor who purchased the Tax Certificate is reimbursed either when the property owner pays off the lien, or when the property is sold. If at some point, the original owner pays the taxes, the holder is paid back his investment and title to the property remains with the original property owner. If not, the property will be auctioned off at a tax deed sale.
What are the legal requirements for a tax deed auction?
There are strict notice requirements imposed on all tax deed sales. The legal title holder and all lien holders must be notified of a tax deed sale. The rules are complicated and in depth, sometimes others are required notice as well and there are many exceptions that require different analysis. The form of notice also has its own set of requirements that must be complied with. It is important to consult with an attorney to ensure the rules are followed, because breaking the rules could lead to title issues or a null purchase.
How does a purchaser at a tax deed sale acquire good title to the property?
After purchasing a property from a tax deed sale, it is important to file a quiet title action. This is a form of lawsuit that ensures all other lienholder’s interests are wiped out. After a successful quiet title action, the property will be insurable by a title insurance company, thus allowing the property to be sold on the open market.
Contact Us
Whether you are interested in purchasing a property in a tax deed sale, have to file a quiet title action, or fear your property may be up for auction, we are here to help. Contact us at (305) 928-4190 for a consultation, where we will advise you on the best course of action.
