How to Prepare for a Tax Sale Auction
Tax sales are not your typical real estate transaction. They can carry a lot of risk for someone inexperienced or if you haven’t researched. As municipalities seek to recover unpaid taxes and put up the properties for tax sale, it’s a quick process. For tax sale investors, the responsibility is on them to understand what they’re investing in and ultimately handle any complications. Here is how to prepare for a tax sale auction and what you should know beforehand about how this process works.
1. Treat A Tax Sale as an Investment
Don’t fall in love with any one property. Look at multiple tax sales in your area. Treat them as investment income opportunities and stick to the numbers, such as what you can make for a return and what you’re willing to put forth as a bid.
2. Determine What Your Budget Will Be
Don’t overspend on a property. Always stick to the budget you decide for yourself. A tax sale auction can be exciting. With bidding wars now fairly commonplace, especially for city properties, you’re more likely to want to spend above your comfortable spot, which puts an investor at risk. Fall back on the numbers.
3. Research the Tax Sale Auction Process
There should be ample online information about your municipality’s unique rules, laws, and regulations surrounding tax sales. Every municipality, such as tax sales Ontario, follows a lot of the same processes. However, there can be significant differences you will want to be aware of, including any requirements for putting in a bid.
4. Understand How to Submit Your Bid Correctly
You don’t want your bid to be rejected for arbitrary reasons. Whether it’s a tax sale auction or a tax sale by public tender, understand how to submit a bid, the deadline, and what’s acceptable in the form of payment. Also, ensure you’re properly registered for the auction in advance.
5. Contact A Tax Sale Lawyer With Expertise
It is advised by most municipalities to speak with a lawyer experienced in tax sales. For example, you will likely need a lawyer’s assistance if people are still living at the property, you gain ownership, and you want to start the legal eviction process. A lawyer can also answer various questions on tax sales, providing more insight into how they work and the benefits.
6. Attend A Tax Sale Auction as a Practice
If you feel very out of your depth with a tax sale auction, attend one as a guest and see up close how they work. This way, you better understand how the process works and what to expect on your tax sale auction day.
7. Put On Your Admin Hat and Do Some Paperwork
Look at the property history for any liens or judgments against it that could impact ownership. Do a title search summary. Look at what impact building or zoning restrictions have. Seek any documents or information online about the property or similar properties in the area.
8. Inspect A Property To Verify It’s In Good Condition
You cannot walk into a property you don’t own and conduct a visual inspection, but you may have photos online, and you can inspect it from public property, such as the road. Take a drive out and see if you can see any hint of damage, repairs in need, or potential problems with the property that could impact your return.
9. Get Pre-Approved for a Loan Weeks Before
You are probably not putting down your savings to finance a tax sale auction transaction. To finance a tax sale, get pre-approved for your budgeted amount in the form of loan weeks beforehand. Discuss with your lender what your plan is, what funds are required, and what’s required of them to help with the process.
10. Bring Documents and Your Bid Money in Hand
Bring all essential documents to the tax sale auction, i.e. driver’s license or ID. Have the money available to complete the transaction on the spot, either in cash, money order, bank draft, or certified cheque. Verify before what types of payments are accepted.
11. Set Aside The Time for the Tax Sale Auction
A tax sale auction may last for a few hours. Set aside your day to ensure you can complete the process if you win the tax sale auction. Arrive early. Wear comfortable clothing. Listen closely to the auctioneer before, during, and after bidding to understand your requirements. Ask questions if you have any.
12. What To Expect If You Win a Tax Sale Auction
If you are the highest bidder at a tax sale, you must pay the amount you bid and cover all taxes owed then and there. If you have been pre-approved for more money than was your bid, the municipality can reimburse you and issue a cheque for the unclaimed funds. A receipt and additional paperwork are provided at the end, and you leave with a tax lien certificate.
