Steps to Take BEFORE You Receive a Tax Deed

Steps to Take BEFORE You Receive a Tax Deed
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Seven “Must-Do” Items Before You Receive Your Tax Deed

When the redemption period on a tax lien property is about to expire and I know I’m going to receive a tax deed, I take several steps in preparation for receiving this tax deed and thus ownership to a property.  In fact, I have a short checklist of items I always think about before the tax deed is issued.  I use this to identify any initial action steps I will need to take, and it helps me generate an estimate of expenses to help me determine what strategy I’ll take in order to maximize the value of the property.

 My Tax Deed Checklist

  • Form an LLC to hold the property.
    • Never hold a tax lien property in your own name.
    • Ideally, you should transfer into this LLC before it’s recorded.
  • Check for municipal liens and fines.
    • Call the city code enforcement office. 
    • Check the exterior door for any postings.
    • Check title if it was run during your tax lien foreclosure or quiet title.
  • Check for tax delinquencies and current taxes owed.
    • Go online or call the tax collector/treasurer.
    • Make sure you don’t risk losing the property to another lien holder or accrue unnecessary penalties.
  • Determine occupancy.
    • Inspect the exterior of the property (but, don’t trespass)
    • Check if utilities are on.
    • If vacant, get ready to take possession by lining up locksmith.
  • Determine if I want to put insurance on the property.
    • Insurance options are limited—see if you can get business insurance or an umbrella policy that would cover a loss.
    • I only put on hazard insurance if the property has a good amount of value.
  • Determine “as-is” value and rental rates.
    • Have a real estate agent get you a ‘worse-case’ BPO or determine the value yourself.
    • Assume the property is not in good shape and will need repairs.
  • Create my initial strategy for the property.
    • Put together a conservative pro-forma of all potential expenses and revenue from a sale or rental
    • Determine if you want to sell the property, rent it, hold on to it or do a workout with the former owner or mortgage company.

Tax lien investing is always full of surprises. I want to quantify those unknowns early in the process so that I’m not sinking money into a tax deed property because I’m taking the wrong approach.  You have lots of options–you can sell the property as-is, make repairs, lease it, workout a settlement with the former owners, even walk away completely.  Make an initial call on what you want to do early, you can always change it later as you find more information. You’l increase your profits and minimize wasting your money.

35 Responses to “Steps to Take BEFORE You Receive a Tax Deed”

  1. Elvia Crane says:

    Hi There Taxlieninvestingpro,
    I take your point, I will be attending our county’s tax sale in Oct, and I was wondering if any individual has any know-how procuring residence at this kind of a sale. Was it a high quality or negative adventure? Did the defaulting operator actually redeem the home? Or did you stop up with a quitclaim deed, and if so, how prolonged did it require? Thanks!

    • taxlienpro says:

      Elvia – which state are you investing in? Historically, 90-95% of the tax liens redeem before it gets to the point where you might get the property.

  2. rebecca says:

    Hey elvia!

    I just had wonderful luck at a land sale and managed to pick up 26 acres with a barn and a huge shop for 500 bucks! I went to the tax sale and a writ of exicution sale was held afterward(I bid and lost on the tax property but won the other). There is a bit more work involved in researching the land and a surprize or two almost always comes out after the purchase (like 2 unmarked barrels that I will have to call a hazardous waste removal company to come carry off since I do not know of the contents), but since the market price for the property is $231,000 I am willing to put in a bit of elbow grease. Good luck and most of all have fun!

  3. Michelle Holland says:

    Once you have acquired a tax deed to the property and you have determined that the property is occupied by either a tenant or the owner, what action do you take to remove the tenant/owner from the property?

    • taxlienpro says:

      Good question…I always start by trying to contact the occupant to figure out just who is in there and to see if you can work something out with them. I’ve run into properties where there was a tenant who just stopped paying the former owner and I immediately gave him a new lease. However, there are times when you can’t get a response or they are uncooperative. Most states allow you to have possessory rights to the property immediately upon issuance of the tax deed (meaning you can hire a real estate attorney to file an ejectment (eviction) action. In other states, it’s advisable to go thru a quiet title before trying to remove them from the property.

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