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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, and founder of the tax sale academy.

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.

On today’s episode, we’ll be discussing over OTC properties. Over the counter properties also known as OTC properties are the properties that are sold quite literally, over the counter. Just like you walk in to your grocery store and buy milk, you’d be able to walk into the county’s office to purchase a property.

And it should be noted that OTC properties can refer to both tax deeds where you’re buying the actual property and tax liens where you’re buying a lien against the property. Both are available OTC in many areas. Some counties also refer to OTC properties as lands available for taxes, county held properties, surplus properties and a few other names which all refer to over the counter properties.

So now that you know what OTC stands for, let’s go into some details.

As we’ve discussed in previously episodes, once a property becomes delinquent it will work it’s way through the process used by that state and it will eventually be auctioned off. Now, n the event that the property goes to auction, but doesn’t sell, which means essentially no one bids on it, in many states that property will become available OTC or over the counter.

So again, that’s where you’d walk in, choose the property you want, make payment and walk out owning the property.

So, how much are these OTC properties sold for?
Well, the price tag is typically going to be set at the amount of the back due taxes, interest and fees owed on that property. Come up with that amount and you can buy that property in most states.

If it sits on the county’s list for a set period of time, some areas will eventually begin to lower the price of that property until it sells. The great thing with OTC properties is that there is typically no competitive bidding process. You know how much you’ll be paying for the property prior to walking into their office which is a great way to be efficient.

In other areas while they don’t technically offer OTC buying, it can be a semi-negotiated process with the same result. What I mean by this is that they will either negotiate the price with you, or you’ll submit a sealed offer to the county who will review it and say yes or no. There is no bidding and usually no competition. Now, don’t let the word negotiated scare you away. I recently purchased 10 properties through a negotiated process where my bid for the property had to be read aloud at a county commission meeting with a majority vote to sell me the properties. It sounds like a pretty complicated process, but in the end my bid of $75 per property or $750 for ten properties was unanimously approved so it’s not that big of a deal.

Another benefit of OTC purchasing is that that you know what’s available. These properties are unlikely to get redeemed or removed from the auction at the very last minute like some traditional auctions allow. For the majority of the properties, the only chance they’d be removed from the OTC list is in the event that another investor walks in and buys that property before you.

This really allows you to invest the time necessary to research the property. It can admittedly be frustrating researching properties, performing site visits and preparing to buy a property only to have it removed at the last minute. This rarely happens with OTC properties, unless you are waiting a significant amount of time for the purchase and another investor swoops in in the meantime.

Of course, there is one primary negative that comes along with OTC properties. And it’s the exact reason they’re available OTC. Let me remind you of the process again. You have a property owner who fails to pay the taxes on a property to the point where they lose that property or a lien is filed. From there, the property goes through the auction and no one at the auction decides to make a minimum bid. Then the property is offered OTC. So we have a property owner who doesn’t pay the taxes and then a room full of bidders, presumably, that don’t want the property.

Now, it’s possible that this is a property that has slipped through the cracks. HOWEVER, it’s more likely that this property has some sort of issues. The most common properties I see available OTC are worthless properties. Narrow, unbuildable lots. Properties in flood zones. Properties with contamination issues, landlocked properties, that kind of thing.

A large percentage of the properties available OTC are properties that you do not want to purchase. And this percentage increases even more the longer the properties sit on the OTC list. If there are any properties on the OTC list that are a year or older, you MUST perform very very thorough due diligence to insure you aren’t buying a worthless property. Because at this point, a property owner failed to pay the taxes, no one bid on the property at the auction and now it has sit on the OTC list for a year or longer.

I don’t say this to scare you, however. When it comes to OTC properties you can get good deals from time to time if you’re extremely careful and diligent with your research.

As far as accessing the properties available, I’d call the county’s tax foreclosure department and ask them where to get a copy of the OTC list. They’ll usually provide a website that will have the list posted as well as the instructions for buying.

Here’s the strategy that I recommend when it comes to buying over the counter properties: Check the OTC list early and often. The best OTC properties will not sit on the OTC list for a year or longer. In fact, they probably won’t even make it a month. What you’ll want to do is scoop the best properties up as soon as they hit that list. Monitor a few different counties and as soon as you see a worthwhile property, perform your research and buy that property as quickly as possible.

Buying OTC properties is always a hot topic and many investors have had tremendous success with just this strategy. My caution to you though, is to be patient with what comes available and by all means, perform even more thorough research for the OTC properties then you would for standard tax sale properties. You must be 100% positive that you didn’t miss any of the drawbacks of that property prior to purchasing it.

That’s it for today’s podcast guys. If you’d like more information on investing in tax defaulted real estate, including over the counter purchasing, be sure to visit us at TaxSaleAcademy.com. That’s TaxSaleAcademy.com.

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Take care guys and make it a successful day.

See ya!