How to Get Started with Tax Sales

Imagine buying a home for tens of thousands instead of the hundreds you’d pay for even a small property. This idea has drawn in regular Canadians, investors, and businesses to check out tax-delinquent properties at tax sales. To start with tax sales, you need to learn how to research properties, place bids, and understand the process of getting a tax-sale home.

Here is a beginner’s guide to tax sales.

Search Tax Sale Listings Online

The first place to start is the listings. A quick Google search will reveal a list of tax-sale properties coming up for sale or already gone. Comb through these listings and learn how to read them.

You may want a rental property to start a real estate portfolio, renovate and flip a house, or find a property to call home. In clear terms, define your purpose for starting tax sales. This will help you decide what properties are worth a bid.

After combing the available listings, note which properties capture your interest. After you have this list, you can do further research before bidding.

Research Each Property’s Value

Note each property’s assessed value and minimum bid amount. Assess the value of each tax sale property you have an interest in. Find a maximum amount you’re willing to bid for each. You want to stick with this number, even when bidding turns emotional or competitive.

Do Your Due Diligence with a Title Search

Perform a title search to uncover liens or encumbrances that could impact your property ownership. While mortgages and most claims are wiped away during a tax sale, some aren’t – including Crown interests.

Complete a Drive-By Inspection

A home inspection you would do in any other real estate transaction is not guaranteed in a tax sale. In all likelihood, you won’t be allowed a formal home inspection. You can do a drive-by inspection and assess a property’s external condition while looking for warning signs.

Research Tax Sale Rules for Your Municipality

Tax sales are held locally at municipal levels. They are not run provincially or federally; each municipality runs its tax sale differently. Study the tax sale regulations in your locality, including what format they use and whether it’s a tax sale auction or held by public tender.

Prepare Your Financing

A lender will not mortgage a tax-sale home. Buyers have to find financing elsewhere. This often involves liquidating savings accounts and other sources of funds or seeking private lenders. If you are the highest bidder at a tax sale, the total amount is typically owed immediately or within a few days of closing.

Not every tax-sale property is a winning investment. Tax-delinquent properties are not and should not be considered. That is a truth every beginner must learn. Your research will tell you whether a property is worth your bid.

Tax Sale Schedule

There is no rule saying you have to buy in your locality. You may search for other municipalities with more frequent and attractive tax sales. You should find out the deadline for auction or sale by public tender.

Tax Sale Auction

If the format is a tax sale auction, attend on the day of, listen to how the format will go, and ensure you’re registered. Always enter the bidding later when others have reached their bidding limit or withhold your bidding after a tax sale house falls outside your budget limits.

Tax Sale Public Tender

A public tender tax sale means you bid once and only once. Submit your best bid based on a property’s value. Ensure your public tender documentation is completed and a deposit is included with your bid.

Know Your Responsibilities

If you are the highest bidder, you have several responsibilities for owning a tax sale house. You are responsible for any eviction process since vacant possession is not guaranteed. If there are Crown liens on the property, you must resolve them. Environmental concerns, such as contamination, fall on you. Additionally, if there are arrears like water or hydro bills, they become your responsibility.

How the Redemption Period Works

When a tax sale is initiated, the property is subject to a grace period during which the prior owner still has time to pay off the fees owed and regain the property. Know the grace period length to know when you can take full ownership and move on.

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