Pennsylvania has fastly become one of the hottest markets for investors. With Philadelphia being one of the largest cities in the country and Pittsburgh ranking as one of the most livable cities, especially for young professionals, it is no surprise that Pennsylvania has a thriving market for real estate investors.

The suburbs of these major cities have experienced growth in tandem. Like the rest of the country, Pennsylvania has also felt the pinch of the housing shortage sending more and more investors to delinquent property tax sales in PA.

New investors to any tax sale market means a new learning curve. PA is a challenging state for newbie investors since across most of the state there are three different types of tax sales: Upset, Judicial, and Repository.

Each type of sale has its own unique rules that are vastly different when it comes to what liens and encumbrances remain on title vs those that are extinguished.  Below are the liens that survive each sale type in PA:

 

Upset Sale

    • Only the current owner loses their right to the property

Judicial and Repository Sale

    • Current owner(s)

    • Mortgage holders

    • Judgment holders

    • IRS

    • Mechanics Liens

    • Municipal (trash, water, sewer)

As with all tax sale investing, buyer beware. Depending on the type of tax sale in PA, an investor could be inheriting more risk than they bargain or budget for.

Father Time is another major obstacle investors should be cautious of in PA. Counties often take up to 3 months to record your deed after the tax sale.

If there are excess proceeds(aka overbid funds) from an Upset Tax Sale, those can be used to satisfy some of the liens/encumbrances that could still be against the property; however, it could take over a year for the county attorney to disburse those funds.

Until then, you as the owner of interest are responsible for those liens/encumbrances. Time can also impact your judicial sale investing as well.

Even though Judicial Sales are sold “free and clear of all liens, judgements, and encumbrances”, oftentimes there is a delay in the water department receiving notice of the tax sale so it may take a little longer for the water department to show a zero balance on the bill.

These time delays all may seem minor but they can slow down your disposition or stabilization strategies since a title agent may require the funds to satisfy these issues to be held in escrow until they are satisfied and show a zero balance owed.

Last but not least, always be cautious of inheritance when the owner at the time of the tax sale is a deceased party. Although the inheritance tax is not typically an earth shattering amount, every penny matters when investing and the state will collect if they have not received their payment.

The statutes governing tax sales in Philadelphia (Philadelphia County) and Pittsburgh (Allegheny County) are different from the rest of the state so we will cover those in a separate blog.