Transcript:
Welcome to the Tax Sale Podcast, where tax sale investing is made easy.
I’m Casey Denman, a tax sale veteran, expert, and trainer, author of the tax sale playbook, founder of the tax sale academy and your host here on the tax sale podcast.
Thanks for joining me on today’s podcast, and as always, at the conclusion of this podcast, if you’re looking to learn more about investing in tax defaulted real estate head to taxsaleacademy.com. That’s taxsaleacademy.com.
I wanted to record a podcast episode today on preauction purchasing. This is something I’ve shot quick videos on for my YouTube channel and I have an entire workshop devoted to it inside the academy. But I also wanted an audio version to make sure you didn’t overlook this strategy.
Preauction purchasing is just that . . . buying properties prior to the tax sale auction. While we’ll get into the details, the quick version is that you’ll locate a property that an owner is about to lose to tax foreclosure. The owner will presumably be very motivated to get something for the property instead of lose it entirely and will sell it to you at a highly discounted price. You’ll negotiate with the owner, pay off the delinquent taxes and you’ll be able to buy the property for a discounted price while avoiding an auction or OTC issues and competition. Likewise, the title to the property will also not have become clouded because of the tax foreclosure process which will allow you to sell with title insurance and avoid the time and expense involved in clearing the title. Obviously, if there are lots of outstanding mortgages or liens, then this strategy won’t work unless there is a sufficient enough purchase price to pay those off.
While I can’t go into every single detail on utilizing this strategy in today’s podcast episode, I do want to provide you with at least the framework behind the concept in a quick five step process.
1. Review the tax sale list. Before continuing it’s important to address the timeline issues here. There are two variables: (1) you’ll want to find motivated sellers. So if their property is schedule to be auctioned off in a year, it’s unlikely they’ll be too motivated today. But we must keep in mind (2) which is that it’s going to take time to track down, negotiate with and close the transactions – so an auction in one week will likely not allow us the sufficient time required to do all this. So, find a list in the sweet spot. Preferably a list of property scheduled to be auctioned between 30-90 days away, if possible. This will be possible in some areas and might not be possible in other areas depending how far in advance they’ll post their lists. And as far as finding lists, I’ve got videos on that over on YouTube and we go into detail inside the academy. But long story short, it’s easy.
2. Once you have a suitable list, it’s time to review it to locate properties you’re interested in. Obviously, this isn’t a step t just breeze over. Like any tax sale list, there will be a number of properties that you just don’t want. There will be countless junk properties and others that just don’t fit your investment objectives. But go through the list methodically and choose which properties you do want to pursue. You’re going to be investing time into acquiring these properties, so you need to figure out which ones you will buy and which ones you won’t buy right now in this step. Otherwise you’ll be wasting valuable time chasing properties you don’t truly want as we continue moving forward.
3. Contact Owners. Your next step is to locate and contact those delinquent owners. That’s right, just find them and make contact. It sounds pretty easy right? Well, I can assure it that this is likely going to be the most difficult step for you. Many of these owners bought the property decades ago and have forgotten about it, all while moving five or six times and not updating their address. Other owners will avoid anything having to do with this property since the last thing they heard, they were going into foreclosure, which can certainly cause people to hide and become scared. Many owners are, well, dead. So they won’t be responding anytime soon. And quite a few others have fairly common names. If the owner is John Smith, you might as well move on. I’ve even found another Casey Denman before, and he just so happened to have died in a car crash. So the whole, just google there name can be a little difficult. Obviously, this step will require quite a bit of effort. My suggestion is to try their last name address and cross reference with Google. Then search Google, social media and anywhere else you can think of to locate and contact them. Let them know you are trying to save their property from tax foreclosure and you’d like to work a deal out with them.
4. Speaking of working a deal out, the next step is to negotiate. You want to work out some sort of deal with them that makes it worth there effort. Most owners won’t want to go out of there way just to sign it over to you for no compensation. Obviously, you can relay to them that you’re trying to save the property from going through tax foreclosure, which, if the property is in their personal name, might have repercussions against their credit and other issues in the future. It’s unlikely, but possible. So that’s one benefit, but on top of that you need to determine how much avoiding the competition at the tax sale will actually save you. Then base your offer on that and if they refuse it, just understand that you’ll have your shot to bid at the auction. If they agree, then write up a contract!
5. Close it. The last step is to get it closed. Once you have the property under contract, have a title company or attorney perform a title search, close it and issue title insurance on the property. Do everything the cleanest, most conventional way possible. The title search and title insurance step is extremely crucial here, otherwise you might be overpaying for a property that has title issues. Something to note is to make sure you explain the deadline that you’re on to the title company or attorney. If they’re planning to close for a week to go on the employee retreat, that’s going to be something that you want to know. Just be very upfront and firm with them on the closing date. Once it’s closed, they’ll be the ones paying the taxes off and you need to triple check that they do this as soon as possible so it doesn’t reach the auction. Once you make payment, close the transaction and get the taxes paid off, the property is yours to sell!
So there’s your overview of the five step process to purchase tax delinquent properties prior to the tax sale auction. This strategy is essentially to facilitate a private party transaction, by assisting you to identify properties in distress and negotiate directly with their owners.
That’s it for today. Thanks so much for joining me on this episode.
If you haven’t done so yet, be sure to pickup your copy of my free book, Tax Sale Playbook, which you can get at TaxSaleAcademy.com. The book itself is free, we just ask for your help covering the nominal shipping costs.
And as always guys, if you found this episode helpful it will mean so much to us if you take a few second to leave positive feedback.
Take care guys and make it a successful day.
See ya!