Owning a home has long been an American dream, and a tax sale may be one way to achieve it. Several years ago, real estate prices kept going higher than most people thought possible. Homeowners saw their property values rise by tens of thousands almost overnight. Home prices were becoming increasingly difficult to qualify for first time home buyers. Their savings accounts just couldn’t catch up. But then the bubble burst and property values plummeted. This was terrible news for buyers who bought at the top of the bubble. Many homeowners found themselves with homes they couldn’t afford and mortgages that were higher than the places were actually worth. Jobs, retail, and businesses lost steam, and many foreclosures occurred.
When a house goes into foreclosure, the owner no longer sends payments to the lender. Mortgage payments are made up of principal, interest, taxes, and insurance. The lump sum is mailed with a coupon and the bank distributes the funds to the appropriate locations. The banks keep the principal and interest. The insurance company receives its share and the county treasurer received the property tax share. When no monthly payment was sent, no one received the funds owed. When property taxes become delinquent, homes can be repossessed and sold to pay back taxes.
Property taxes are collected by each county municipality and distributed to pay for community services. These services are what make a community and neighborhood desirable and increase the value of real estate. Examples of services include public schools, community colleges, parks, landscaping, courthouses, libraries, police, fire, and sheriff’s departments.
This is an unfortunate circumstance for people who lose their homes. For first-time homebuyers, this may be the other side of the coin. The tax sale can be your golden opportunity. But it’s imperative that investors do their homework to make sure what they buy is a smart investment. Here are some things to think about:
– Location: Is the house in a safe and desirable neighborhood? A rule in buying real estate is threefold: location, location, location. This is one aspect of a residence that cannot be changed.
– Structure: Is the house in good structural condition? Do you have a solid foundation? Is the roof in functional shape? Are electrical and plumbing components safe and usable?
– Cosmetics: What cosmetic remodeling needs to be done to make the place livable? This is secondary to the structural problems, but it is still important. Adding up the costs of flooring, painting, window or door replacement, and landscaping will give the buyer a better idea of what the property will actually cost in the long run.
– Finance: Properties purchased at auction must be paid for immediately upon acceptance of your winning bid. A buyer must have cash on hand or financing ready to deliver to the auctioneer.
After doing their homework, a first-time homebuyer can purchase a smoking offering through a tax sale auction. What was once a sad situation for the person who lost their home can become a wonderful home-sweet-home for the one who makes it their own.