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Amongst the many deals that home buyers can look at on the housing market, a back tax house -- a house that is being sold to pay off back taxes--is a tricky one, but it also may be the deal of a lifetime. When a home owner defaults on tax payments for a year or two, their house may be sold by the sheriff's department to pay those taxes. Their house only needs to sell for the value of those unpaid taxes plus interest and fees associated with selling the house. Altogether, this value is called the tax lien, and it is typically a small fraction of the value of the house. By attending a sheriff's auction, you can purchase a house for the cost of its back taxes as long as you have the funds immediately available, as you will have to pay the purchase price in full before leaving the auction.
There are problems that you may run into which you should be aware of before attempting to purchase a home as a tax lien sale. First of all, the home is not completely yours until after a set period (determined by the sheriff's office) during which the previous homeowner has an opportunity to pay you the purchase price you paid plus interest and regain their home. During this period, it is best not to make any further investments in the property since the previous owner will not be required to pay you back for any improvements you have made to the house in the meantime, should they redeem their home.
Secondly, if the previous owner had not completely paid off the mortgage, then you would need to assume mortgage payments as well. Hence, you are unlikely to find a very new home at a great price this way, because few owners have made much headway paying off the mortgage for their new homes.
This brings us to the third common problem: people who have already paid off their mortgage but do not pay their taxes for over a year are often not in the financial position to maintain their property. If the property is in poor condition, you may be buying your way into a house-sized headache.
To avoid these pitfalls, do your research and be flexible. Don't simply show up at a sheriff's auction and buy the cheapest or swankiest house that is put up for sale. Rather, research individual properties listed as tax lien sales. Try to assess the likelihood of the owner redeeming the property, whether the property is in good shape, and if the mortgage has been paid. If the property owner is still living in the house, it may be hard to determine the house's actual state; similarly, you may not have access to information regarding the likelihood of the owner redeeming the property. It may help to know, though, that in the vast majority of cases, home owners who lose their homes to back taxes do redeem their homes within the specified period of time. Even if they do not, you may still have problems to deal with, such as additional liens the government has placed on the house. Make sure to dig up any information about other liens and fees associated with the home you are interested in buying since you will incur all of these costs should you successfully purchase and keep the home.
If this type of deal sounds like an adventure to you, then you may be just the type of person who can get a good deal out of buying a house by paying back tax.
There are problems that you may run into which you should be aware of before attempting to purchase a home as a tax lien sale. First of all, the home is not completely yours until after a set period (determined by the sheriff's office) during which the previous homeowner has an opportunity to pay you the purchase price you paid plus interest and regain their home. During this period, it is best not to make any further investments in the property since the previous owner will not be required to pay you back for any improvements you have made to the house in the meantime, should they redeem their home.
Secondly, if the previous owner had not completely paid off the mortgage, then you would need to assume mortgage payments as well. Hence, you are unlikely to find a very new home at a great price this way, because few owners have made much headway paying off the mortgage for their new homes.
This brings us to the third common problem: people who have already paid off their mortgage but do not pay their taxes for over a year are often not in the financial position to maintain their property. If the property is in poor condition, you may be buying your way into a house-sized headache.
To avoid these pitfalls, do your research and be flexible. Don't simply show up at a sheriff's auction and buy the cheapest or swankiest house that is put up for sale. Rather, research individual properties listed as tax lien sales. Try to assess the likelihood of the owner redeeming the property, whether the property is in good shape, and if the mortgage has been paid. If the property owner is still living in the house, it may be hard to determine the house's actual state; similarly, you may not have access to information regarding the likelihood of the owner redeeming the property. It may help to know, though, that in the vast majority of cases, home owners who lose their homes to back taxes do redeem their homes within the specified period of time. Even if they do not, you may still have problems to deal with, such as additional liens the government has placed on the house. Make sure to dig up any information about other liens and fees associated with the home you are interested in buying since you will incur all of these costs should you successfully purchase and keep the home.
If this type of deal sounds like an adventure to you, then you may be just the type of person who can get a good deal out of buying a house by paying back tax.
