Should You Buy A Tax Sale Property?
Most Americans want to own their own home and buying at a tax sale is one way to achieve this
. During the first decade of the 2000's, the housing market went through a crazy cycle. In normal times, home prices increase slowly and consistently over a period of years. During a bubble, something starts property values climbing at an unnatural rate and that's exactly what happened. Home prices climbed so fast that owners thought they were living in gold mines. Many started tapping into their sizeable equity like it was an ATM. Homeowners went on luxurious vacations, remodeled their abodes with granite countertops, added pools, and more. When the cycle reversed itself, lots of homeowners suffered financial problems. Suddenly, they couldn't afford the lifestyle they'd been financing from their equity and they couldn't afford to pay property taxes.Tax sale properties are similar to foreclosures. There are different kinds of distressed properties including foreclosures, short sales, and those taken back by the government for nonpayment of property taxes. Foreclosures are bank owned properties. A home goes into foreclosure when a homeowner stops paying his or her mortgage payments and the banks take back the house. When a homebuyer signs on the dotted line for a mortgage, he or she has contracted with the lender to pay the monthly payments or relinquish the property. Short sales are a bit different; they are a method of selling a distressed real estate by negotiating with a lender to accept a new buyer's offer. The new offer is less than the amount owed on it because the value has dropped. Many lenders accept these lowball offers since they realize the loan is underwater. When a homeowner stops paying his or her property taxes, the county government repossesses the house in order to auction it at a tax sale to pay back taxes.
Property taxes are paid to the county treasurer where the home is located. These fees are collected from every person who owns real estate in that county in order to cover municipal services. Services that are paid for from this pool of money includes police officers, the fire department, sheriffs and deputies, parks and recreation, public libraries, public schools from kindergarten through community college, and the courts. Without these services, our neighborhoods and towns would be much less desirable to live in.
For the investor or first time homeowner looking for property at a bargain price, a tax sale may very well be the place to go. While there are excellent deals to be had, buyers must do their homework before handing over the cash. They need to inspect the property to make sure they know what they're getting into. If the home needs repairs, they should get a ballpark estimate of how much it will cost to renovate it before the auction is held. They should make sure their potential purchase is in a safe neighborhood because the location is one thing that cannot be changed. They also need to have the cash available to pay immediately. When purchasing a piece of real estate from a tax sale, obtaining a mortgage is not an option.
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