Last week I wrote about my experience at the Monroe County Judicial tax sale. I could have gone on and on about the investors I met the novices that I got to talk to, or some of the big-shot out-of-towners that I now will have lunch with at a future date. But I just wanted to point out some of the highlights of a long and eventful day. I truly believe that attending a tax sale auction is an event that everyone should attend at least once in their lifetime. I was disappointed that I did not win 2 houses I was bidding on. It was something to see $1.6 million spent on 133 properties in a period of less than 6 hours. As I attend more auctions in the near future, I hope to have the opportunity to not only share my observation, but to win and share in those secrets of my success.
I want to thank Joanne Musa for the chance to share this experience. I wish you success in your tax lien and tax deed investing. I truly believe that attending a tax sale auction is an event that everyone should attend at least once in their lifetime. If you decide to go, here are some tips:
- Know your investment strategy ahead of going to the tax sale. This will help you layout your plans prior to, during and after an auction.
- It is important that you do your due diligence on any property, you should know the:
a. Comparable sales and related data
b. Estimated repairs (if you are able to view the entire property)
c. Market – Who will likely benefit most from your property, other investors, retail buyers, renters, etc…
- Budget extra money in the event of unexpected events. Most real estate auctions, especially tax deed auctions are “as is, where is”, with no refunds. That is mentioned not only in the announcement prior to the auctions, but mentioned a few times during the auction.
- Stick to your budget. Set maximum bids based on profit margins you set for yourself. This will help you decided if a property is really worth the bid.
- Pay attention because bidding goes fast and you may lose out on something you wanted, or bid on the wrong property because you weren’t paying attention.
- Don’t get caught up in the energy of the room. If you are bidding on a parcel and there are bids higher than yours, stick to your maximum bid. Failing to follow this could cause you to lose money on a property you won.
- Have a backup plan. You may not win the property you’re bidding on. You may pay more than what you wanted (if you believe the property is worth it). A “plan B” or even a “plan C” maybe necessary and doesn’t hurt.
- Include all costs when bidding. Most tax sales require the winning bid, plus transfer taxes and other fees. Failing to remember this may have you coming up short. This will cause you to lose out on your winning bid and in some cases, have you become ineligible to bid at any auction that municipality/county may hold in the future.
- Bring the correct form of payment. Some municipalities will not accept cash at time of payment and most will not accept personal checks.
- Pay as soon as possible after winning a bid at the tax sale. All Counties set time limits on when payment must be in. At the auction I attended, payment was required by 1pm if you won in the morning session and 4pm if you won in the afternoon session.
Don’t be discouraged if you do not win the parcel you bid on. Auctions are competitive and don’t be surprised if there are bids higher than yours. Be prepared to see individuals or companies with deeper pockets then yours. They may know the same information that you do regarding the parcel you want to bid on, the difference between you and them is that you know how much you are willing to spend. This is the difference between winning and losing.
About the author: Shawn Hobbs is a Tax Deed investing agent who bids for investors at tax deed and tax lien sales who either cannot physically bid at the tax sale themselves or who do not feel comfortable doing the neccessary due diligence to make sure that they are bidding on profitable tax liens or tac deeds. You can find out more about his agency, SJH Investments, LLC by e-mailing him at SJHInvest@gmail.com.