14 Auction Best Practices for Tax Sales

Tax sale public auctions can be a tense, high-stakes environment. As municipalities put up and dole out tax-delinquent properties, residents, investors, and corporations come forth with bids. As the price is quickly driven up, emotions often take hold, leading to overbidding to become the winner.

Following these auction tips for tax sales can help ensure you don’t get caught up in the atmosphere and can keep your focus on your strategy.

Attend a Tax Sale Auction

Familiarize yourself with the rules of a tax sales auction. If you don’t intend to bid on a property during the next tax sale, you may still want to take the time to attend. This way, you can get a feel for the environment, understand better the requirements, and see how bidding works.

Get There Early

To minimize the risk of emotional bidding, make sure you’re comfortable. Get there early, grab the best parking spot, ensure you’ve eaten and are hydrated, and choose where you want to sit most comfortably.

Know Your Finances

Each bidder has a fixed amount of money. Know the maximum amount of money you have to invest in a tax sale. As it needs to be your money, you will unlikely seek assistance through a lender. It must come from your savings, loans, and other means of acquiring funds.

Manage Your Budget

Come up with a budget that allocates what you have to set areas. A tax sale should not max out your budget as you will likely face additional fees in the year afterward, such as legal costs for eviction, immediate repair costs, long-term renovation costs, and holding expenses.

Do Your Homework

Go beyond the tax sale listing and research the property. Put the property address into search engines and social media to discover what, if any, information you can dig up. There is a lot of data you can collect online.

Visit the Tax Sale Property

Visit the tax sale home in person. A home inspection is not permitted; however, the property must be observed from a public area, such as a road or park. Inspect it for any obvious signs of damage, concern, or red flags. Assess the surroundings.

Have Payment Ready

Learn how payment deadlines work for your local tax auction. Many require payment to be provided anywhere from hours to a few days after the auction. If the funds are not already available, there are no payment extensions. You must have payment ready.

Ignore Hype or Emotion

It does not matter how a tax sale listing looks or what others say about it. A bidder should go into a tax sale auction with data. Bid according to the facts and research you have, and ignore any hype or emotion that may be surrounding a listing.

Bid and Counter-Bid Quickly

An auction moves quickly. There is no reason to hold off until the end and jump in. The end can arrive quickly without you being able to squeeze in a bid. Move quickly with bids and counter-bids. When the bid amount, however, reaches your limit, stop.

Beware of Shill Bidding

‘Shill bidding’ is a dishonest practice in which one or more bidders drive up the price so that others spend more on a tax-sale property that is not worth that much. The idea is that it will direct investment away from another property the ‘shill bidder’ has their eye on.

Tier Your Interested Properties

You can bid on more than one tax-sale home. Prioritize them to understand which you prefer to bid on first. If you miss out on one, consider the next. This flexibility keeps you strategic but can prove difficult if your first choice does not come up first in the auction.

Be Prepared to Walk

Auctions are unpredictable. If things get crazy, even the best-laid plans should be set aside and walk away. Be adaptable to the possibility that you may not walk away with anything – which is far better than a tax-delinquent property you have overpaid for.

Consider a Partner

If you are inexperienced and nervous, consider partnering with a more experienced investor or someone experienced in real estate. They can guide and advise during your first auction and assist you with the risks of emotional bidding or going over budget.

Know the Wait Time

An investor can rarely walk into a tax sale and walk out with full property ownership. Redemption periods exist, where the prior owner has a last chance to redeem. There may also be time required to file paperwork to transfer ownership. Ensure you know the wait time.