What to Know About Buying Houses With Unpaid Taxes
At first glance, buying a house on a tax sale can seem like a steal. You pay a fraction of its assessed value, gain an investment property to add to your asset count, and you can re-sell it at a later date for significant profit. This isn’t always how paradise plays out, however.
Risks exist. You can end up paying tens of thousands more than anticipated on necessary repairs or evicting a prior homeowner who refuses to leave.
Here is what to know about buying houses with unpaid taxes, the good and the bad.
Houses with Unpaid Taxes Vary In Quality
Consider the circumstances that may lead to a home with unpaid taxes being sold. Some of these properties have admittedly seen better days and are more rundown, but others are decently maintained and worth every effort to pursue. It’s up to you to find and decide which property is worth a further look.
Find Listings of Houses with Unpaid Taxes Online
If you’re interested in buying a house with unpaid taxes, you can find listings online on tax sales property platforms. Listings include the basic information of a property, which, while limited, can help you determine what is worth bidding on and what isn’t.
Municipality sells Homes With Unpaid Taxes
After an extended period of a homeowner refusing to pay their property taxes, the municipality assumes ownership of the home. You are buying the house from the municipality, not the prior owner or the lender who provided the prior owner with their mortgage.
There Is No Real Estate Agent, Bank, Or Lender Involved
When you buy a house with unpaid taxes, you will never encounter a real estate agent, bank, or lender. The process itself is fairly simple, and the paperwork is minimal.
This is very unlike the average process of buying a home. It’s quick and easy if you have the money to cover your bid.
Most Liens Against A Property Are Removed
Most liens are removed when a property is put up for tax sale, though not all. Be sure to conduct a title search to see if there are any liens or claims against a property that could interfere with your bid or ownership.
Grace Period for Prior Homeowners to Pay
The prior owner has a grace period to resolve unpaid property taxes. You have no claim to the property if they can cover the taxes during that period.
Pay Less for The House, and You Pay the Taxes
A municipality just wants to recoup the property taxes owing, and they want the asset off their books. They’re willing to part with that for much less than the house’s worth. If you cover the unpaid taxes and fulfill the terms of your bid, you own the property.
Real Estate Investors Bidding
Real estate investors love buying tax-sale homes. They’re quick, easy sales for an investor that can be flipped later for a massive profit sometimes, with or without renovations.
Bidding Wars Will Drive Up the Total Cost
You may be shocked at how little the minimum bid amount is for a tax sale home, but rest assured, that number will be quickly driven up by bids. You can expect to pay more to secure the house in question for you.
High-Risk Real Estate Investing
You buy a tax sale home sight unseen and as-is. You have no right to a home inspection and won’t know if there’s damage on the inside that requires repair. Though you can inspect a home from public property, nothing goes inside.
Bid on the wrong house and a tax sale can easily leave you with more of a headache than anything else. That said, you can research the neighbourhood and the house’s exterior, read through the full tax sale home listing, do a title search, and ask around.
From these efforts and others, a lot can be gathered about a home before bidding.
Bidon Tax Sale Properties and Put Up A Deposit
To buy a house with unpaid taxes in Ontario, you bid on it by public auction or public tender. As you bid, you must put up a deposit, usually at 20% of your bid amount. The highest bid gets the property.
Limited Time to Pay In Full for the House
You may have as few as 14 days or less to fully pay for your house. If you do not have the remaining cash available, you may be required to forfeit your deposit and lose claim over the home.
Alternatively, if the prior owner comes along and pays off the taxes owing, this nullifies your bid altogether. Your timeline is important.