I've been a real estate investor for over 10 years and tax sales have really been a great investing area for me. So I wasn't surprised when I saw that John Beck has been running an informercial now for some time showing others how to make money just like I have purchasing tax sale properties. The most exciting thing about the informercial featuring John Beck is the display of properties he shows which his students have purchased for less than $1000, free and clear.
I'm sure if you're reading this page now, you're considering buying John's course, or at the very least, curious about how tax sales work. But maybe you saw the "Inside Edition" in April 2009 exposing John Beck for fabricating some or all of his examples on tv.
I can't confirm for sure if the Inside Edition episode is accurate or not, but I can tell you for sure that tax sales can produce the best bargains out there in real estate investing. But before you jump on the John Beck website or call his 800 number to order his program, why not learn a little about tax sales and decide what you want to accomplish with tax sales.
The first thing you need to know about investing at your chosen tax sale is whether the government is offering a tax deed or a tax lien when you buy at the auction.
If they are offering a tax deed, a list will come out showing all properties subject to tax deed sale, and if the owner does not pay the taxes by the tax deed sale date, you can bid on the property against others at the sale. If some states, you are the successful bidder, you will own the property free and clear (in others, there are some hoops to jump through first).
Can you guess what the problem is with trying to get a bargain property at a tax deed sale? You will be bidding against many other bidders at the sale, and it would be a rare event indeed to get a property worth $50,000 for $500 when there are other bidders in the room bidding against you.
If the government is offering a tax lien, you will be buying only a lien against the property, not the property itself. You will have to give the owner a certain period of time, which varies from state to state, to pay the lien off. If the owner does not pay the lien off in this time period, you may then be eligible to apply for a tax deed to the property. In some states the owner can pay the lien off right until you get your tax deed.
Now, you will have a much better chance buying a bargain tax lien that can lead to an eventual property deed. The problem is, if you've purchased a lien against a $50,000 property for $286, most of the time, the owner will show up to redeem (pay the taxes on) the property!
What other obstacles will you face? Well, my county recently put out a list of 10,000 properties to be offered at their tax lien auction, and only about 1,200 sold. That tells you that the other 9,000+ properties were not even worth the amount of taxes owed on them!
You will have to attempt to eliminate worthless properties from the list that comes out, and personally inspect the rest (from the outside only!) Then you'll have your "short list" of properties you want to bid on, and you'll have to determine the maximum you're willing to pay for each.
Once you get to the sale, you will be outbid on many of these, and others will no longer be offered at the sale.
After all this work, maybe you've purchased a few cheap tax liens against good property. Now you will usually need to hire a lawyer to do a title report and give notice to each party that has an interest in the property. If the owner doesn't pay you off, congratulations! You may now apply for a deed to the property.
Just be forewarned, your deed is probably not exactly "free and clear"! The IRS may still have certain rights in the property, and in most areas you will have to do a "quiet title action" in order to be able to sell the property with title insurance. This quiet title action gives all interested parties one more chance to challenge your tax deed. These parties can and do come forward and reverse tax sale deeds all the time.
Who is the tax sale right for, then?
If you're like most aspiring tax sale investors, you want cheap property, and you want it now! Unfortunately, it's almost impossible to get cheap property now through a tax deed sale, and you have a long education and wait ahead of you if you want to acquire properties through tax liens.
The fact is though, if you have a large amount of money to invest, and want to do so safely, tax liens are a great investment. This will be proven to you when you attend your first major tax lien sale. Institutions often attend the sale and purchase millions of dollars in liens at a time. Most states provide for a 10-20%+ return on your money if you invest in tax liens.
However, if you are limited in funds, or really just want properties instead of a decent annual return on your money, you need to try deedgrabbing. It's a way to get tax property before the auction, without bidding against other bidders, oftentimes free and clear, and... ready for this?... for under $1000 most of the time, and sometimes for free. Yes... free.
Want to learn the secrets of deedgrabbing? Go to deedgrabber.info.
Olliver Kennedy is a successful entrepreneur and real estate expert.