Transcript:
Hey guys, it’s Casey Denman here from Tax Sale Academy.com
Thanks so much for joining me on today’s livestream here on Facebook. As always, at the conclusion of this livestream, if you’re looking to learn more about investing in tax defaulted real estate head to taxsaleacademy.com, that’s taxsaleacademy.com.
Today, we’re going to talk about buying properties before tax sale auctions. This is a popular topic for many investors, especially beginners. The idea, of course, is to sneak in work a deal out with the owner and buy the properties prior to the auction so you eliminate all competition. And while it might just work, there are a few challenges. So we’re going to talk about some pros and cons when it comes to preauction purchasing.
First off, you must understand that preauction purchasing is really nothing more than just buying a tax delinquent property. At this point it’s not technically tax sale investing, but many tax sale investors do buy properties in this manner as an additional way to acquire properties. Now I could go on for quite a while about this topic, and we actually have an entire workshop devoted to it inside the academy, so just understand I’m going to go over the basics in today’s livestream.
There are two primary benefits and two primary drawbacks to buying properties prior to the actual tax sale auction.
Let’s first discuss the benefits . . .
The first is the most obvious. You avoid the competition at the tax sale. You’ll deal directly with the owner. Your purchase price will be what the owner accepts. If you can buy the property for what the opening bid amount would have been plus a nominal amount of a few hundred or even a few thousand dollars extra to the owner, then everyone could potentially win. You eliminate the other bidders and the owner walks away with some cash in their pockets instead of nothing.
The other positive is that once the taxes are cleared, the title will still be clean, excluding any other encumbrances which will discuss momentarily. Part of the issue when a property goes through tax foreclosure is that this act causes a cloud on the title. This means that title insurance is not typically easy to get and will usually require a suit to quiet title, a tax foreclosure certificate or some other additional action. These can be time consuming and expensive. The other option is to sell the property with the clouded title, but you’ll certainly get less money. By buying the property prior to the auction you don’t need to worry with any title issues, since you will or should at least, receive title insurance when you make your purchase.
Alright, now let’s discuss the two primary drawbacks.
First off, most people don’t realize how difficult it can be to deal with the owners. In many situations the addresses of record are from many many years ago, so it’s not as easy as just sending a letter and getting a phone call. In other situations the owner might have died. Or it could be owned by multiple parties and one person might have died, requiring a lengthy probate period that you might not have time to wait for. The owner might also just not want to negotiate with you at all – surely you think they’d rather get something then nothing at all, but in many situations that’s exactly what happens. Working with owners can be extremely difficult at times.
The second drawback is something we referenced earlier. When you buy a property prior to the tax sale, you’re essentially buying a tax delinquent property in a conventional transaction. This means that any liens or encumbrances will remain. There could be an outstanding mortgage or other type of lien that must be paid off by the seller, which could hurt your ability to negotiate with them since that has to be paid off. In order to establish clear title, you’d have to have an attorney or title company perform a title search, then issue title insurance and of course this costs money and takes time that you might or might not have depending how close to the auction you’re negotiating.
I wish I could sit here and tell you that buying properties preauction is an easy way to avoid competition and get incredible deal, but I just can’t. The truth is that a well rounded investor has many different strategies and techniques they use to invest in real estate including preauction purchasing.
So guys I hope this gives you a quick idea about the viability of preauction purchasing. It can work, but like all investment strategies it’ll take time, knowledge and effort to apply it correctly.
That’s it for today’s livestream. I really hope you’ve enjoyed it. If you enjoy these livestreams, be sure to let us know by subscribing to our channel and clicking that thumbs up button below this video. We also welcome your feedback and suggestions on future videos so we’re able to serve you the absolute best we can.
And of course these livestreams and the videos we offer are only just the beginning when it comes to the training we offer. For example, we have an entire workshop on just preauction purchasing inside out academy among hundreds of other training videos. If you’d like to take advantage of our more advanced training, be sure to head to TaxSaleAcademy.com. That’s taxsaleacademy.com.
That’s it for today guys. Make it a successful day.
Take care. Bye bye!