February 16, 2024
Buying tax delinquent properties can be an intelligent move, often letting you snap up real estate for much less than its worth. However, these auctions are usually competitive. They typically draw a diverse crowd, including solo bidders, groups, and large investing firms, all eager to claim a property. It's not uncommon for a minimum bid to be nowhere near what a tax-sale home is eventually sold for.
Before attending a property auction, read the listings carefully, make notes, and always come prepared. Follow these tips to prepare for your first auction.
Know what you're looking for. Buying tax delinquent properties at auction is a major investment. If a property doesn't meet your expectations, don't settle. Leave it. Another property opportunity will come along during this auction or another.
The municipality will not tell you if Crown interests, liens, encumbrances, or interests are attached to a tax-delinquent property. A title search will. For any property you intend to bid on, it's smart to have previously done a title search to know any complications.
If this is your first tax sale auction, familiarise yourself with the bidding process, the type of auction your municipality uses, and how everything will work.
An average tax-delinquent property auction winning bidder will pay not only the amount they've won but also all accumulated taxes, penalties, interests, GST/HST if applicable, and land transfer taxes within a defined schedule – usually 14 days – of being declared the purchaser. This varies, however. Confirm the full list of required costs with your municipality.
Understand where your budget top is and how much wiggle room you have. As frustrating as it can feel to have someone outbid you, if you stick to your maximum bid limit, you won't put yourself in financial peril.
Know what you expect from a property, i.e. a return. The premium you pay to get a tax-delinquent property should be what you feel comfortable paying for the return.
Tax-delinquent properties need better shape. They may require maintenance, repairs, and renovations. Expect these costs and factor them into how you're bidding at auction. Don't be caught with a home needing repairs you can't afford to cover.
Save time by bidding low. Always start with a price close to what you want to pay. This way, low bidders are knocked off the hook right away. If there is a counter-bid, you'll waste no time countering with a quick, decisive higher bid.
A high bid discourages others from entering the bidding war. It also lets everyone in the room know you're serious and ready to fight for the property mentioned.
Be strategic with your bidding. When you encounter buyers or bidders competing against you, look at their facial expressions, body language, and visual cues. You may be able to tell when they've reached their limit and decide whether to continue bidding or let the property go.
Don't let yourself get caught up in the excitement and overbid or get angry when an auction doesn't go your way. If you do not land a property, that is okay. Many people let their emotions take over, and it's never positive. In an auction, you need to keep your cool.
In most auctions, investors like you should back down. Stay focused when the number is within a property's potential, then back down to the next auction property.
Be prepared to attend a few auctions before winning a tax-delinquent property. Auctions are exciting but overwhelming, and most auctioneers walk away with nothing. This means that the right tax sale home has yet to come.
If you win a property auction for a tax-delinquent home, ensure you have prepared the accepted forms of payment. Tax delinquent property auctions accept cash, certified cheques, money orders, or bank drafts. Municipalities do not accept IOUs. A winning bidder must have the money to close the sale.
