Have you purchased a property through a tax deed sale and are now stuck with figuring out what to do next?

If you are not learning and listening to folks who have been in this business for a while, you are probably receiving conflicting advice. Oftentimes your realtors and/or attorneys or other investors will just flat tell you that you cannot sell the property.

This is completely inaccurate. In fact, you own the property and can do with it what you please. Want to leverage it and take a loan against it?

Do it!! Want to flip it quickly and wholesale the property? Do it!! Want to sell it to a buyer who needs financing? Do it!!

There is nothing standing in your way. However, some of these options may take more time than others. Follow this step-by-step guide to figure out the best way to sell your tax deed property.

Step 1: Assessment of The Tax Deed Property

To be a successful investor, you need to evaluate both the physical condition of the property along with the chain-of-title.

Physical Inspection: In today’s world of tax sales, many investors are purchasing site-unseen based on an image from google maps that is probably a few years old. First-off, this is a horrible way to do things. That house you think you just purchased may very well have been demolished a few years ago. So, step one is to have someone physically go to the property. If you cannot physically make it to the property, you can often pay an inspection service to do what is called “drive-by” inspection on your behalf. They’ll take pictures for you and give you an overall report on the status of the property. If you did not do this in your due-diligence, do it now before you go any further.

Title Report: Another crucial step in the due-diligence process is obtaining a title report. Why, you ask? Tax sales extinguish all liens and encumbrances – FALSE! 90+% of the time municipal liens (ie..trash, water, sewer, code enforcement) survive tax sales. If you have not already done so, you’ll need to order an O & E Report (Owners & Encumbrances) aka a Current Owner Search. This will let you know if there are any recorded liens, judgments or other encumbrances against title that you may be financially responsible for. Depending on the amount owed, this may alter what your investment strategy is.

Once you have completed your due diligence assessment of the property condition, it is time to determine which disposition strategy will best suit your investment goals.

Step 2: Sell your Tax Deed Property

Selling your tax deed property can be a cumbersome task for new and experienced investors alike. Here are a few different scenarios that will either help you sell your tax deed quickly or for top dollar…or both!

FSBO: For Sale Buy Owner: If you purchased a lower value property and have thin margins, this may be the best bet for you. Or let’s say you did not complete your due diligence on the property and purchased a property that is riddled with liens and encumbrances that would otherwise eat into your profit margin to cure.

Selling your property could be as easy as planting a sign in the ground, finding an online auction company or FSBO service to list the property for more visibility and simply conveying the property via an uninsured deed such as a quit claim deed (QCD).

By conveying the property with a QCD, you as the investor are passing the property and all title encumbrances on to a prospective buyer. However, do not do this to dupe a buyer into inheriting your problem. Reputation is everything as an investor and even though an FSBO deal involving a QCD should raise flags for any buyer, it is always in the best interest to disclose any issues that you are aware of.

In today’s real estate world, selling a property FSBO is now easier than ever but make sure you keep your reputation on the up & up when doing so.

Online Auctions: I briefly touched on the auction process during the FSBO section but this is often a great way to flip the property, especially if you are not local to the market where the property is located.

In most cases the auction company will charge the seller a small fee to list the property but will make their real money on what is called a “Buyer Premium”.

You can sell tax deeds that are vacant land, commercial property, multi-family, residential, etc… There is appetite for all sorts of tax deed properties since they typically do not demand full retail value on resells. Very much like going down the path of the FSBO, you can flip the property with little to no title curative work.

However, if the property has insurable title, the seller can typically demand a much larger asking price which equals higher profit margins.

Although, obtaining insurable title can take time and cost a seller additional money, the profits generally well exceed the capital put out to achieve marketable title. Plus your buyers will be much happier.

Hire a Real Estate Agent: Go the traditional route, list the property with a local real estate agent.

Oftentimes, nothing beats the touch of someone with intimate knowledge of the local markets.

Working with an agent can be beneficial for multiple reasons: First, if you have vacant land – many agents have established relationships with local builders who are eager to find their next parcel at a great price.

If the build goes well, you could have a mutually beneficial long-term relationship and strategy to make your investing easier.

Second, if you renovate your tax deed property, there is no one better than a local real estate agent to help you command top dollar for your hard work.

Selling your tax deed property through a local real estate agent has many advantages that provide you with great exit strategies for your investment.

Dealing with Title Issues before Selling

Here is a pro-tip on how to sell your tax deed for maximum profits. As an investor, you need to make sure that chain-of-title looks as good as a freshly renovated property.

What I mean by that is, most tax deed properties are sold with an instant “cloud” on title that prevents investors from really commanding top dollar for their property. You will lose leverage if you can only convey the property to a new owner using a quit claim deed, which is common practice when there are blemishes in the chain of title that cause a cloud.

Although properties sold at tax deed sale are sold free and clear from most liens and encumbrances, the county does not warranty title and releases for these liens/encumbrances are not recorded by the parties who lost their interest from the tax sale.

This is why a “cloud” on title is created. To be clear, a “cloud” on title is created when the property is sold at tax sale, no matter how perfect of a job the county did with their due process noticing.

The fastest and least expensive way to clear the cloud on title is to work with a company like Tax Title Services, who issues a certificate that verifies the tax deed property is insurable.

Once the chain of title is insurable, the property can be conveyed to a buyer via a Warranty Deed or any deed with warranty (this varies by state).

Conclusion

Selling a tax deed property can be simplified by using methods like online auctions, FSBO services, or hiring a real estate agent. It’s important to maintain a good reputation by disclosing any known issues to potential buyers.

Insurable title can increase profit margins, and clearing title issues can be done efficiently with services like Tax Title Services. Follow these steps but don’t forget the final step: Rinse & Repeat!