How to Buy a House at a Tax Auction

Consider buying a home at a federal, state, or local tax auction, but, as with all purchases or investments, take the necessary precautions.

Instructions

  • Step 1: Locate and inspect tax auction properties before becoming an auction participant. Check property tax and lien records at your local tax collector's office.
  • Step 2: Go the IRS website and request a Notice of Public Auction or Notice of Sealed Bid Auction. Subscribe to Treasury Auctions e-mail updates at ustreas.gov.
  • Step 3: Consult a real estate attorney or professional. IRS seized properties are sold "as is," with no guarantees or warranties expressed or implied.
  • FACT: Actor Nicolas Cage blamed his financial manager when the IRS filed a multimillion dollar property tax lien against him.
  • Step 4: Know what a tax deed auction is. Minimum bids are usually equal to unpaid taxes plus penalties. Winners get possession after recording the deed.
  • TIP: If overdue taxes are paid, certificate owners will get their lien investment, plus interest -- typically a comparatively high 10 to 12 percent.
  • TIP: Most property tax lien auctions are held by counties or municipalities.
  • Step 5: Contact your county or municipality tax authority for current auction information. For example, Los Angeles sells a purchase auction book.
  • Step 6: Know about tax lien certificates. A lien holder won't take ownership if the original homeowner pays overdue taxes during a designated redemption period.
  • Step 7: Know about state property tax auctions. Tax lien auction winners initially become tax lien certificate holders. Tax deed auction winners become owners.

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