Have you ever attended the annual county tax sale? Land owners pay annual property tax for real property – land, residential and commercial buildings – to the county every year. If you fail to pay property taxes for four years, the property is auctioned.
Property owners should receive notice of their delinquent taxes by March 15th to the last known address of the owner through certified mail. The “last known address” is the address where tax invoices were sent previous years. Then, depending on the county, the owner may pay their delinquent taxes and additional fees up until the day before the tax sale or up until the start of the tax sale. Each county writes unique procedures for their tax sale. The procedures must comply with state statutes regarding tax sales.
The day of the auction, prospective buyers register with the county, take their seats and numbers, and the properties are sold to the lowest bidder. Opening bids begin at the sum of the owed taxes and fees.
Property sales may seem to good to be true, but they can be investment opportunities if you consider the following:
Property is sold as-is. If you buy the property, you are provided a “trust deed” meaning the property deed is not insured and possibly clouded. Clouded titles are fixable but require additional title research and possibly litigation to create clear title. Clear titles are much easier to insure and transfer.
The property may not have water. You must do your research prior to a sale. Read the deeds and determine the property’s water source. Is it water shares? If so, junior or senior shares? When were those shares last used? If in town, contact the municipality and determine if there are water or sewer/septic systems set up and if they are up to code. If relying on water shares, review the historical usage reports and contact the water company to confirm the shares are still usable.
The property may be derelict. Similar to a foreclosure, you cannot view the property before the sale, or even during the sale. I recommend doing a general drive by to gauge the value of the property.
You must have cash available. Tax sales require payment the day of sale by cash or certified check.
New tax liability. If you buy property, you are now responsible for future property taxes and a capital gains tax when you sell the property. Discuss your personal tax planning with your financial advisor, accountant, or research extensively to avoid any surprise taxes.
By statute, the county must conduct its property sale in May or June of each year. Contact your county recorder to find out more information about the sale in your county. Until then, keep paying your property taxes.
Disclaimer. As always, my column is not legal advice, instead merely insight into the law and legal profession. If you have a general question about the law or legal profession, please email me at firstname.lastname@example.org or call 435.610.1431.