Tax Sale

My first tax sale

My first tax sale

The mysterious tax sale.  I have heard hero stories about people making huge profits buying and flipping tax sale properties.  I wanted to find out what it was all about.  I figured I would gain experience by attending a smaller town tax sale as my first one.

Shelly and I have some properties in her home town (Digby Nova Scotia).  I figured this would be a good place to start.

I googled tax sale Digby, and in the search results I found information on the municipality of Digby’s up coming tax sale.  There was a list of all the properties and owners names on the municipality website.

I searched for properties that I found interesting, then I had our area property manager drive by and take some pictures.  You do not have the opportunity to enter the properties, but you can view them from the outside.  A lot of the properties listed were land only.  There were a few on my list with houses, but the homes were in pretty tough condition.

The tax sale is a town or a cities last resort to collect owed property tax and turn the property over to a property owner that will pay the tax.  The city or town will make numerous attempts to collect the money from the property owner before the property is auctioned off.

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In the case of the sale I attended, the properties (approximately 30) were a minimum of three years in arrears.  That means the owners of these properties have not paid tax for a minimum of three years.

If you were the successful bidder on a property the property owner has six months after the sale to pay the taxes and redeem the property.  If you are the high bid and pay for the property you have to wait six months, before you access it.

When I arrived at the sale, the parking lot was packed.  I walked into the building and it was clear everyone was there for the sale, so I was given a list of the properties that were going to be auctioned off.  The amount of tax and fees owned was also listed.  That portion of the bid needs to be paid immediately.  The balance has to be paid in three business days.

I walked into council chambers (where the auction was being held).  I managed to find a chair, and waited for the bidding to start.  The auctioneer (in this case she was the deputy warden) went over the rules.  Then the bidding began.  What you were instructed to do, to place a bid was to state your name and amount of the bid.  The bidding starts at the amount of tax and fees owed, which on some of these rural lots was as low as $400.  This of course is a starting bid, so some water front properties reached $60000.  You need to pay the taxes owned and any fees associated with the property on the spot with either credit card, certified cheques, debit, or bank draft (you have three days to pay the balance).

I almost made a mistake and got caught up in the action.  I wanted to buy something and since all the properties on my list got redeemed before the sale, I was re-evaluating the list.  A property with dwelling was coming up.  The start bid was $2539, so I figured how bad could it be.  A house that I could rent for $2539, what a deal.  I tried to see it on google earth, but it was on a back road, so I could only see it from a blurry satellite picture.  There was only one bidder on the property, and as they were about to do the final call for bids, my rational side kicked in, and I resisted the temptation to bid.  The successful bidder got it for the taxes owing ($2539).  I picked up Shelly after the sale and told her we were going to drive by a house, and I was going to either say, thank god I did not buy that, or dam I missed a great deal.  We drove by the house, and I am glad I did not get it.  It was a dump on a small lot, surrounded by other abandon houses.  I would base the real estate value at very close to zero.  I am not sure what happened to the owner, clearly no one had been living in the house for a long time.  I mentioned earlier in this post that the taxes had not been paid for three years, so if an owner is not paying taxes, they are usually not taking care of the up keep.

I would describe the people that attended as coming from all walks of life, some older people, younger people, people from all over the province.  One thing that everyone had in common, was they were hoping for a great deal on a piece of real estate.  There was a great optimistic energy in the room.  I am sure some people went away happy, others who were caught up in bidding wars, were not too happy.  I saw some people get frustrated.  I saw some folks not bid on anything, and others bid on everything.  I am excited to attend another tax sale.  I do realize that you may have to look and bid on several properties before you get a great deal.  You also need to make sure you do your research and be disciplined and only bid on what you plan to buy.

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Here is a summary of how it all works:

1. How to find a tax sale:  Google tax sale and whatever city or town you want to buy real estate in.  If they do not have a tax sale listed, send them an email from the “contact us” section of the website.

2. Check out the listings: Take a look at the tax sale listings.  Do a drive by or have someone you can trust do a drive by of the properties and take some pictures.

3. Decide how much you are willing to pay: Decide what you are going to bid on and how much you are willing to pay.  Do not get carried away and pay too much.  Do not let your ego do the bidding for you.

4. Realize you will now have to pay all future property tax:  Make sure to realize, that if you do get the property, you will need to pay the taxes from now on.  I mention that, because some people might be tempted to buy a bunch of cheap parcels of land, and then have to pay a bunch of property taxes every year on land they do not necessarily want.

5. Have cash or credit card ready on sale day:  You need to pay the tax balance and fees owed at the sale with cash, credit card, bank draft, or certified cheque.  I mean on the spot.  You go from the bidding room right to the cashier.  Everything above the tax and fees owned needs to be paid within three days.  You need to have a high limit credit card ready on sale day, and then access to the rest of the cash you will need within three business days of the sale.

6. If you are high bid, can you move in immediately:  When you are the successful bidder and you pay, your money gets held for six months.  The owner has six months to pay the taxes owed and fees and redeem the property.  If the property is redeemed your cash will be returned to you with interest.

Michael P Currie

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