Tips for Tax Delinquent Homes for Sale

A tax-delinquent home for sale can be a reasonable way to purchase real estate for as little as possible, potentially yielding a significant return for a smart investor. If you’re looking for the best real estate deals, it makes sense that you may come across tax sales. Property tax sales occur all over Canada, providing municipalities a way to recoup property taxes while offloading properties into the hands of investors.

Here are some important tips for tax-delinquent homes for sale you can use to make the most informed decisions around this type of real estate investing.

Tip #1: Read The Tax Delinquent Home For Sale Listing Closely

A tax-delinquent home listing is fairly bare a lot of the time, but examine it closely. You can see information about location, property description, tax sale date, title availability, and photos.

Tip #2: You Are Buying A Tax Delinquent Home As-Is

Tax delinquent properties are sold as-is. Anything that needs to be renovated or fixed falls on you to do. If there’s environmental contamination, this is also an expense that you must clean up. This creates risks a buyer must be ready for and have the budget to accommodate.

Tip #3: All Types Of Properties Can Be Sold In A Tax Sale

Homes in tax sales are often interpreted as purely residential in design. All properties, including commercial, industrial, cottages, waterfront homes, farmland, vacant land, and islands, are listed for tax sale.

Tip #4: Research The Property Value First And Your Potential Return

Don’t just bid on any tax sale property. When compiling your budget, do some preliminary work to determine how much a property is worth. Look at market conditions, the area, and what you know about the property’s condition.

Tip #5: You Can’t Inspect The House Or Receive A Visit

A bidder on tax-delinquent homes has no right to enter the property until they’re the owner. You purchase it not having seen inside. You are not permitted to visit the home other than to view it from the sidewalk or a public road.

Tip #6: If It’s Sale By Public Tender, Make Sure You Follow The Rules

Public tender accepts bids by mail or in person, but it’s not done in a public auction setting. If you submit a bid by public tender, ensure it is received before the tax sale date and ensure you’ve correctly filled everything in. A municipality can reject an incomplete bid.

Tip #7: You Will Need A Deposit To Make Bids By Public Tender

When submitting a bid by public tender, you must include a deposit of at least 20%. If your deposit is less, your bid will be rejected. The deposit should also be a bank draft, money order, or certified cheque.

Tip #8: Don’t Overbid On Tax Delinquent Homes

You must have the funds to purchase a tax-delinquent home for sale upfront and in full, with all fees covered. As you bid, never overbid and put yourself at risk of financial trouble trying to cover the purchase above your budget.

Tip #9: Purchase Price Includes Land Transfer Taxes And HST

Your total purchase price is what you bid, plus land transfer taxes and HST. You have up to 14 days to make the payment in full.

Tip #10: How You Can Finance Buying Tax Delinquent Homes For Sale

A municipality ultimately does not care where you take the money from to buy a tax-delinquent home. A purchaser can have it from credit cards, personal loans, or even use a home equity line of credit, or HELOC, to fund such a purchase.

Tip #11: There May Be Liens On A Property

While a tax-delinquent property for sale wipes away traditional mortgages free and clear, this remains on the title if there is a Crown Mortgage. If you are interested in a property with Crown interests, contact the relevant government agency to determine how to pay off this debt.

Tip #12: Be Ready To Deal With An Eviction

Someone may be living in a tax-delinquent home that you must evict if you want to take ownership. Eviction is not the municipality’s responsibility. It is yours. This will require hiring a lawyer and pursuing the legal route to an eviction, which can be time-consuming and occasionally costly.

Tip #13: You Can Withdraw A Tender Before The Date

If you want to withdraw a tender for a tax-delinquent home, you can so long as you write to the municipality’s treasurer and it is received before the specified deadline for receiving tenders.

Tip #14: Tax Sales Can Be Cancelled

A tax sale can be cancelled if the tax deed is registered and the owner pays the property taxes owed. If you have submitted any money towards such a tax sale, such as a deposit, you will be reimbursed in the event of a cancellation.

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