Tax Deed Sales Lead to Another Profit Opportunity
If you’ve ever attended tax deed sales hoping to get bargain property, you’ve probably experienced some disappointment as those low opening minimum bids shot up to near market value. While a $100,000 house for $4,000 is a great deal, there are many other bidders who feel the same way, and they’ll bid that property up to $75,000, $85,000 or even full market value in some cases.
When I first got started with tax deed sales, I felt the same frustration as, time and time again, properties were bid out of reach. In the meantime, however, I’ve learned how to stop fighting this bidding and use it to my advantage. There are two ways to do this.
Let Properties with Title Problems go to the Tax Deed Sale
In my investing activities, I often run into properties that have title problems which would prevent me from reselling easily. Since these properties have many liens or other title problems I can usually get a deed to the property for very little money.
When I get a property like this, I do not pay the property taxes (hold the property in a junk corporation or LLC). Eventually the property ends up at a tax deed sale. The minimum bid for the property is roughly the amount of taxes owed on the property.
Even though I can’t resell the property because it has title problems, tax deed sales almost always wipe out liens or title problems, and the property will receive a near-market value bid at the sale.
So let’s say I have a property with $90,000 worth of liens on it that would have a market value of $100,000. I cannot resell the property because of the liens. However, when the property goes to the tax deed sale the liens are wiped out and the property may get a bid of $75,000 – $100,000. If the property taxes owed were only $5,000, this would leave a surplus of $70,000 – $95,000. As the owner who lost the property, I’m eligible to claim the surplus from the county.
If you’re going to use this strategy, make sure that your state allows former owners to claim surpluses from tax deed sales, and that the owner can receive the surplus even if the property had liens.
Help Other Owners Get Their Surplus Funds
Now you’ve seen how surplus funds are created. At most tax deed sales, surplus funds are created for other owners also whose properties went through the sales process.
A little secret that most counties have is that they get to keep the surplus funds generated at their tax deed sales if the owner does not claim them within a certain period of time (usually a couple years). So, the county often puts forward little effort to track down, or even notify the owner of their funds.
This creates a business for us. Through public records requests we’ll find out all of the surplus funds currently being held by the county, and who is entitled to these funds.
Using resources available on the internet (often free), we’ll track down these owners and offer to retrieve their funds for a 40-50% finder fee. Because the counties almost never publish these lists of funds online, the owner will likely be unable to find the funds on their own, and will agree to let us retrieve them.
The best thing about this business is that you can do it anywhere in the country, from anywhere in the country. You do not have to attend tax deed sales to see when surpluses are created. All records and documents go through the mail or email, so you don’t have to travel to obtain information about the past tax deed sales or to sign up claimants for your service.
Profit From Tax Delinquent Property NOW!
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Sites That Link to this Post
- Tax Deed Sales - Bidding Kills the Good Deals | taxsale.net | November 29, 2010
- Tax Deed Sales Build An Unexpected Profit Source | My view on taxes | November 28, 2011
- Tax Agreement Sales Make An Unexpected Profit Source | Property taxes | November 28, 2011