Buying Tax Deeds in California

Whether you are buying a tax lien property to use it as your own dwelling place or you are buying to venture into a new investment you just learned recently, it’s best that WE, at Tax Lien Seminar give you some idea or useful advice if we may, to help you in your newfound love:

First, you, the buyer, should be aware that only the state of California does not sell Tax Lien Certificates, which we had already thoroughly discussed in our previous articles. Instead, some counties in California conduct or exercise rules under and inclusive of the policy of the state of California. These counties issue or sell tax deeds on properties that are defaulted due to the owners failure to pay the corresponding taxes on the property. Every buyer, whether an investor or a homebuyer, should be knowledgeable of the rules of every county. Otherwise, instead of gaining some success from the sale, the buyer may end up losing some hard earned dough.

In short, a public auction is conducted so that the County will be able to recover the delinquent taxes plus some interest and penalty which the owner did not pay for the past two to five years. The auctions are open to all and done in a very honest and transparent process. The sold property is called a tax defaulted property, which, more often than not, are valued much less than its true market value since the buyer has only to pay for the unpaid taxes.

We have seen one particular case in Santa Clarita, a city in Los Angeles County, where an auctioned property’s past-unpaid taxes amounted to USD35.03. The actual appraised market value of the property was USD229,350. So, assuming that after computing and adding all interests, penalties and what have you, and the taxes due amounted to 1000%, although that is quite impossible, the amount that the buyer has to pay will just be around USD35,000. That amount is certainly way, way below the market value of USD229,350.

Of course every county applies its own rate of computation but the standard fee in each county is the Transfer Fee. It is USD 0.55 cents per USD500.00 of a property. For example if the property is sold for 10,000.00, the transfer fee is 11dollars. In short, the sale will depend on the county’s tax rate and value of the property.

After the bidding, the county will do all the paper works to transfer the deed of ownership to your name. Usually, it will take 60 to 70 calendar days after the date of the bidding. Only then can the winning bidder takes possession of the property.

In addition, we would like to cite also a case where the county gave the original owner a chance to redeem the foreclosed property. A prescribed period of three years was set to pay the new owner the amount of bid plus a minimum of 18% and a maximum of 30% interest for the full amount. This only shows that in both cases, the buyer/investor is in a win-win situation. The money you invest will give you a very handsome ROI.