So I’d like to take a swing at helping answer your question as I’ve been doing quite a bit of research on this since I’m looking at moving to southern California and there is very little information to be found on the subject. Skip to the end if you want to see the conclusions I’ve drawn for myself. Below is what I’ve found with references wherever possible.
1. Most properties initially listed are redeemed before the sale. See (http://www.sdtreastax.com/prior-year-sale-results.html) for actual sales numbers but in the last few years about 1/3 of all properties initially approved actually went to auction and fewer yet sold. In my simple logic I assume most homes are redeemed if the person is actually still residing there because scraping together 3-5 years of taxes and penalties is much more palatable then losing all of your equity in the home. Owners also have the option of declaring bankruptcy to delay or stop the tax sale.
2. Most properties that you actually want will not go for the minimum bid (unless you want some land in the middle of nowhere or something else out of the ordinary). I ran down a few of the prior year sales list (refer to the link in 1 for the prior year sales lists) and found that properties that seemed to have a house in an alright area went for well above the minimum bid. To give a few empirical points of reference a house in Carlsbad went for about 360,000 whereas the opening bid was 200,000, another property sold for 315,000 with an opening bid of 181,400 and another sold for 222,000 with an opening of 50,000. You have to assume there are investors there that will drive the prices up, by all likelihood it will still be below perceived market value but there is a level of risk involved and the sales are cash which keeps many out of the process as a whole. I’d speculate and say most banks won’t give you a loan for these properties and if you win a bid and fail to pay you forfeit the deposit. See (http://www.sdtreastax.com/deferred-payment-agreement.html) for deposit and when full payment would be due (it seems either immediately or within 30 days). To correlate properties to actual addresses easily I found that you can take the Assessor’s Parcel Number, go to (sdgis.sandag.org) put the number in and see where it is on a map along with other information.
3. From everything I’ve read the property sold at these auctions are free of most liens that you’d usually think would convey. There are some exceptions here including IRS liens (and/or I assume any lien that could be considered superior then the state tax), liens from local governments, mello-roos, lis pendens and others. See (http://www.sdtreastax.com/docs/important-information-for-bidders.pdf) and (http://www.sdtreastax.com/terms-and-conditions.html) for what can convey with the sale.
4. There is no redemption period as you might traditionally think about it. Technically redemption for the owner of the property ends at 5:00pm the day before the auction. The only other reference I found to redemption was if there is an IRS lien against the property the U.S. government can redeem it but they will pay you the full purchase price. See (http://www.sdtreastax.com/right-of-redemption.html).
5. All properties are sold as is and there seems to be absolutely no guarantees. It seems they will sell you anything at these sales and it is your responsibility to do the research. If the property is not up to code, has a bad foundation, is not developable etc it is on you to know that before buying it. See (http://www.sdtreastax.com/docs/important-information-for-bidders.pdf) especially the “CONTAMINATED PARCELS” section as a reference to what they mean by as is. In short if you buy the property with toxic waste on it then it becomes your toxic waste to clean up.
6. If I were going to buy a house at a tax auction I’d treat it like a foreclosure auction and do as much due diligence as possible. I would pick properties in an area I want and keep an eye on them until the auction approached. I’d gather as much information as I could about them (anything in city/county records) and I would try to get title insurance to ensure there are no IRS/other liens pending. If possible I’d try and find someone who has done this before and probe them for as much information as possible (buyers are listed on previous year sales so that would be a good place to start to track one down). I’d then set a price I’m willing to pay for the property with the appropriate amount of risk factored in. Then show up to the auction, see if any of the properties you want are actually there and if they are then sign up to bid. If the property goes over what you want to pay wait for the next one and if all of them do wait until the next one.
In conclusion I’ve decided this isn’t the best course of action for me as there is a very high level of risk involved, I’m unlikely to find a property in the area I want and while you can get a deal it won’t be that spectacular after you spend money researching the property and fixing it. If you are not looking for a specific area, have the money on hand, know a lot about real-estate, can do some of the handy work yourself and are willing to take a very high risk then it might be worth pursuing.
