14 Tips for Tax Delinquent Property Auctions

Last Updated: 

June 4, 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.

Key Takeaways on Buying Delinquent Properties at Auctions

  1. Set Clear Criteria: Know your requirements and don't settle for properties that don't meet them.
  2. Conduct a Title Search: Identify any liens or encumbrances on properties of interest.
  3. Understand Bidding Rules: Familiarise yourself with the auction process and rules.
  4. Prepare for Additional Costs: Factor in taxes, penalties, and repair costs.
  5. Set a Maximum Bid Limit: Determine your budget limit and stick to it.
  6. Evaluate Potential Return: Ensure the property offers a satisfactory return on investment.
  7. Avoid Low Bids: Start with a reasonable bid to eliminate low-ballers.
  8. Leverage High Bids: Use high bids strategically to discourage competition.
  9. Analyse Competitors: Observe other bidders for cues on their limits.
  10. Control Emotions: Stay calm and rational during the auction.
  11. Know When to Back Down: Recognise when to stop bidding and wait for the next opportunity.
  12. Accept Non-Wins: Be prepared to walk away and try again at future auctions.
  13. Have Payment Ready: Ensure you have the required payment methods ready for immediate transaction if you win.
  14. Prepare for the Long Haul: Anticipate attending multiple auctions before successfully securing a property.
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Rule Out Properties That Don't Meet Your Needs

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.

Complete a Title Search on Interested Properties

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.

Know the Bidding Rules Beforehand

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.

Know What the Full Scope of What a Bidder Pays

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.

Set a Maximum Bid Limit

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.

Analyse a Property for Potential Return

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.

Be Aware of Potential Additional Costs

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.

Don't Bother with a Dramatically Low Bid

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.

The Value of A High Bid Cannot Be Understated

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.

Analyse Other Buyers' Conduct and Behaviour

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.

Keep Emotions in Check

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.

There Is No Wrong with Backing Down

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.

If You Walk Away with Nothing, It's Okay

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.

Be Ready to Pay Then and There

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.

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