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Get Your Best Leads from Tax Sale Pre-Foreclosures

Jul 6, 2008
Are you buying bargain properties by contacting owners facing a mortgage foreclosure? This is a tried and true method for finding motivated sellers. However, I've discovered a better source of leads, which you should consider trying, or adding to your mortgage preforeclosure business: tax sale preforeclosures. You'll contact owners who are about to lose their property due to non-payment of their property taxes.

Everywhere in the country, owners of real estate are required to pay property taxes. And everywhere in the country, some owners fail to pay their property taxes on time, or at all.

Each jurisdiction has a method for handling the collection of delinquent property taxes. Most of the time, all counties in a state will follow the same collection process, but occasionally you'll find variations within a state, or special rules for certain cities or counties within the state.

You'll usually find that the area you want to work in will follow one of two formats: a tax deed format or a tax lien format.

A tax deed format is the most straightforward: the jurisdiction will publish a list of properties with delinquent taxes that will be offered at a foreclosure sale, and the winning bidder at the sale will get a deed to the property. This deed usually wipes out the previous owner and all mortgages and liens that encumber the property.

A tax lien format is a bit more complicated; the jurisdiction sells a lien against the property to recover the taxes owed. The owner of the property does not lose ownership at this time. The owner is given a certain amount of time to pay off the lien, plus interest and tax sale costs, to the investor who purchased the lien at the tax lien sale. If the owner does not pay the lien in the time allowed by law, the investor can apply for a deed to the property.

You can research your state's tax sale online by reading its state statutes and contacting the tax collector. Regardless of the format your state uses, you can calculate a date on which owners will face loss of a tax-delinquent property. If the owner's property is going to a tax deed sale, that date will usually be the date of the sale. If the owner has a tax lien sold against their property, add the time allowed for the payment of the tax lien (the {"redemption period") and you'll have the date the owner will lose the property.

What we will do is contact the owner just prior to the date he or she will lose the property.

I've found that the properties you encounter in tax sale, and the owners who own them, are much different from those you encounter in mortgage foreclosure. You will find a much higher percentage of "walkaway" owners who are letting the property go, who may deed it to you for as little as $10, subject to the taxes owed. Though it seems hard to believe, owners walk away from properties all the time, especially if they have moved out of the area or the property needs repairs. Many don't realize they can sell the property without paying the delinquent taxes.

Another reason owners walk away is that the property was given to them as a result of an inheritance, and was never wanted or appreciated in the first place.

You'll also find that most of the properties you encounter don't have a mortgage; the mortgage company would have paid the taxes by now to preserve their interest in the property.

If you rehab properties for a living, this will be a rich source of houses needing repair. If not, just list the properties you get on the MLS and let a rehabber fix them up.

It's interesting to note that when you buy a property in tax preforeclosure for a bargain price from the owner, and resell or pay the taxes owed, you're removing the property from the tax deed list or preventing a tax lien investor from acquiring it. You may even become well-known to tax sale investors in your area. Go out and get some deeds out from under the tax sale investors today!
About the Author
Rick Dawson is a former tax sale investor, turned DeedGrabber! DeedGrabbers purchase tax sale property from the right before the tax sale investors get their property. You can get deeds to these properties for as little as $10. Learn how today with Rick's new Ebook, Go
Ahead, Be a DeedGrabber!
, available at his site DeedGrabber.com Or subscribe to his free 5-day email Mini-Course to learn more.
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