The Pros and Cons of Investing in Tax Sale Real Estate

by | Nov 29, 2013 | Real Estate

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Tax sale real estate can sound really attractive, but it can have its flaws as well. With the downward spiral of the real estate market over the last several years, investors have been able to snap up great deals at tax sales. Properties that are sold at tax or sheriff sales are typically foreclosures, or properties that are owned by people that are seriously delinquent in their real property taxes. Although investors can get property for rock bottom prices at these sales, they aren’t always as clear cut as what people make them out to be. A real estate investor blog can be a great source of information if investors want to learn more about what tax sales can entail.

The Pros of Buying Tax Sale Properties

  • The sale works like an auction, so investors may only have to pay the amount of the back taxes to obtain the property.

  • Investors can get huge amounts of equity quickly.

  • Tax sale homes often sell for much less than they are actually worth.

  • There are no real estate fees or any other types of fees involved.

  • If the homeowner pays the investor back in the allotted amount of time per the sale terms, then they must pay interest which can be 10-20%, so the investor benefits substantially.

The Cons of Buying Tax Sale Properties

  • Property owners typically have 1 year to pay back the amount the property was purchased for plus interest.

  • Property owners aren’t usually happy that their properties are being sold for taxes, so they may cause damage to the property since they retain possession for 1 year.

  • Investors can usually only view the exterior of the property when they buy at tax sale, because the homeowner is not obligated to show them the interior.

  • Legalities such as liens on the property and other things could arise during the year that the property owner retains possession.

  • Investors may have to force occupants to move once they take legal possession of the property, and this could be costly and a big headache.

While tax sale properties can be very lucrative with significant returns, investors need to be weary of what they are getting into. It is best to speak with financial advisors and perhaps even real estate attorneys to determine whether or not certain tax sale properties are wise investments or not.


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