Home > Auction > Tax Foreclosed Homes Understanding the Auction Process

Tax Foreclosed Homes Understanding the Auction Process

There is a great many infomercials punting the idea of investing in tax foreclosed homes in order to make big profits. While these infomercials are true, many of them are a little misleading because basically they really want to sell you a product. It is possible to educate yourself regarding the processes involved in investing in tax foreclosed homes, just by reading the right kinds of books and collecting information from the internet.

It is certainly best to arm yourself with some education and research on this subject matter before entering the real estate investment market. And the purchase tax foreclosed homes does allow for some good profits to be made.

It is a sad fact of life that in today’s credit crunch, many homeowners are feeling the pinch. The Internal Revenue Service has the right to foreclose on a persons property if they have unpaid income taxes. This in not a quick process, but if the home owner is also in default with his mortgage the process speeds up somewhat. However it is important to know that a Tax lien is superior to any other lien over a mortgage. So even in the lender forecloses on the mortgage owner first the tax lien will still have to be paid. Lenders who purchase foreclosure homes on auction always pay the tax liens, as if they did not the property would become the property of the IRS.

If you are an informed investor, it is also possible for you to buy tax foreclosed homes on auction. There are greater rewards in this method of purchase, but also greater risks, particularly if you have not done your homework.

The beauty of investing in tax foreclosed homes is that you are allowed to inspect the property prior to bidding. This is not the case with bank foreclosures as generally the homeowner is still resident.

There are a number of reasons for properties being sold at foreclosure auctions these include:

  • Failure to meet the demands of mortgage repayments
  • Failure to make real estate property tax payments
  • Failure to make Income tax payments
  • Personal bankruptcy
  • Illegal activity by the owner

Tax foreclosed homes are either sold at a public auction or at a court auction, sometimes also referred to as a Sheriffs sale. In court auctions investors are not able to request discounts for early payment, pay in installments, modify the terms of the contract or transfer the title. This does make thing a little more sticky, but that is the way it goes. Some auction allow verbal bidding while others only accept bids as sealed written offers, so make sure you know what is required of you.

In “non judicial” states the foreclosure process proceeds much faster, generally around three months. In judicial states this process can take as long as eighteen to twenty-four months. For example, judicial states include:

  • Indiana
  • Connecticut
  • Louisiana
  • Florida
  • Maine
  • New York
  • New Jersey
  • North Dakota
  • Pennsylvania
  • Ohio
  • South Carolina

Kevin Simpson

  1. arizonagal
    August 6th, 2012 at 23:24 | #1

    How long till we must vacate our foreclosed home in Phoenix, AZ that sold at auction just over a week ago?
    Our home in Phoenix, AZ was foreclosed and auctioned off to an investors group recently. The representatives that have come to speak to us initially said we could "sit tight" here for a little bit while the group contemplated what they were gonna do with the property yet if we were interested in staying in the home, they would accept us as tenants at the current market rental value for our area. They told us a few days later that the owners have decided they’d prefer to have us leave as soon as possible so they can get started with refreshing the property and reselling it instead and would be willing to let us sign a lease and pay for through the rest of this month, or help us contact salvation army or whatever community aid program to perhaps help us make the transition. Otherwise, they’ll have to begin the eviction process. I really just need someone who really knows what the current laws are to explain how these things usually go down and help me understand my rights and responsibilities. I am in dire financial stress presently trying to recover from an assault two yrs ago that has left me very unwell. My husband & I also have three kids aged 3-11 attending school and we’d really like them to finish the year here. Please help me make an informed decision. Should I bother pay us through the month? Or should I save what little money I have to put towards getting set up in the next place? Most importantly, how long can I push it staying before they can make us leave, and how do they make us leave? Thanks in advance for taking the time to consider my problem.

  2. Obamavenger
    August 7th, 2012 at 04:26 | #2

    You have no rights after the sale is completed. If they are only willing to let you rent for the rest of the month, start packing or plan on having an eviction suit added to your credit report along with the foreclosure.
    References :

  3. The Quizzard
    August 7th, 2012 at 04:28 | #3

    Legally, they are going BEYOND what they have to do in order to give you a little more time. Technically, you can be evicted immediately.

    Morally, your default has already cost the bank thousands of dollars. You’ve had months of free rent already. The new owners are not to blame for your problems, to try and make life difficult for them is not just pointless, it’s morally WRONG. Doing it so you can get MORE free rent is WRONG, and you know it.

    Take the month leeway and move..
    References :

  4. David S
    August 7th, 2012 at 04:30 | #4

    If you enter into a rental agreement, even a month to month, that would be to your advantage, because once you become a lessee, they can’t force you to leave without a legal eviction, and that can take months. Without it, you’re simply squatting in a foreclosed property, and the local authorities could throw you out with very little notice.

    Other than that, you have very little leverage in the matter.
    References :

  1. No trackbacks yet.