Buying homes for back taxes is a unique type of investment that provides you with a steady stream of cash. The real estate market is an open playing field, and you have the opportunity to buy properties at a steep discount. However, buying these homes can keep you up late at night because there are so many decisions to make – it’s not as simple as purchasing stock in Microsoft and waiting for the dividends to roll in. There are many rules that must be followed and legal hurdles that must be jumped through when buying property this way. You can browse here https://www.southernhillshomebuyers.com/we-buy-houses-rowlett-tx/ to see more.
Here is how to get started with this unique investment.
How it works
When a homeowner falls behind on property taxes, he usually ends up in default. He might also lose the home through foreclosure because of nonpayment of mortgage. These foreclosed homes are then offered for auction. Depending on the laws in your state, there are different methods used to auction off distressed real estate. The general process is that the homeowners whose tax bills are delinquent are notified of the auction date and given the opportunity to pay their back taxes before the sale takes place. The properties are then auctioned off and sold at a price that is less than the amount owed in back taxes.
With this type of investment opportunity, the seller of the property has nothing to lose and everything to gain. The more they can sell their home for less than their debt, the better off they will be.
What do I need?
When you go out to bid on a property, you will have to submit an offer to purchase. This is a binding contract, and if you are outbid, you could lose your deposit. You will need to come up with money in order to make an offer to purchase. A good rule of thumb is that bids should be at least 20 percent higher than the owed amount on the property, so if the back taxes are $5,000 and the house is worth $100,000, the bid would be at least $60,000.