How To Buy Tax Deeds In California
Buying tax deeds and liens is not the usual starting point for new investors in tax deed states, but it can be a profitable investment strategy. This niche of real estate investing can be a great resource for buying properties at a steep discount. You can use it if you fix and flip houses, own rentals, or want to earn a return on your money. Do you know if tax deed sales are legal in your state?
how to buy tax deeds in california
Tax deed states allow the general public to sell and invest in tax deeds. Tax deeds are legal documents that grant the ownership of a property to a governing body or public municipality when the original owner is unable to pay their taxes.
Unlike purchasers of tax deeds in tax deed states, tax lien certificate purchasers do not immediately own the properties upon purchasing tax lien certificates. They may not acquire possession of the properties or evict property owners.
Interested in purchasing tax deeds or liens? Let UpNest, which is owned by parent company Realtor.com, help you find a local Realtor with the expertise and contacts to help with your real estate transaction.
Please note that our staff may not give you financial advice. Questions regarding gift tax should be directed to the Internal Revenue Service or your financial advisor. Please note that the Assessor-Recorder transmits deeds and tax affidavits for all claimed gift exemptions to the Internal Revenue Service on a quarterly basis.
Please note that our staff may not give you financial advice. Questions regarding gift tax should be directed to the Internal Revenue Service or your financial advisor. The Assessor-Recorder transmits deeds and tax affidavits for all claimed gift exemptions to the Internal Revenue Service on a quarterly basis.
California uses the term "grant deeds" instead of warranty deeds. Because grant deeds vary in format from county to county, make sure you get a grant deed used by the county where you are filing, which should be the county where the property is located.
The key issue with a quitclaim deed is that the grantee should have absolute trust in the grantor. If not, the grantee shouldn't accept a quitclaim deed. As with grant deeds, forms for California quitclaim deeds vary from county to county, so be sure to get the form from the county where the property is located.
Like other deeds, quitclaim deeds require payment of all back taxes before the grantee can receive the property. If no money changes hands between the grantor and the grantee, a gift tax applies and you must file a United States Gift (and Generation-Skipping Transfer) Tax Return (Form 709). There is no gift tax when a spouse transfers the deed to the other spouse or when the deed is placed into a trust. There is a documentary tax in California, but there's an exemption if the transfer was the result of the grantor's death.
Rather than waiting for payment to remove a tax lien or to hold foreclosed property that is not generating any tax revenue, most municipalities sell their tax liens or tax deeds to investors, who then receive any subsequent payments to either remove the lien or to redeem the property. Buyers of tax liens will generally receive a tax certificate as evidence of their lien, and buyers of tax deeds will have the property. The municipalities of about half of the states sell tax liens; the rest, tax deeds; a few states allow municipalities to sell both.
Although there are few risks in buying tax liens or even tax deeds, the main disadvantage with tax liens is that the investor does not know exactly when payment will be received, so the money will be tied up until then. In the case of tax deeds, the investor will own the property, thus inheriting all the risks of property ownership. Additionally, the title may have to be cleared.
Tax lien sales are sold in auctions, usually advertised in local newspapers. The auctions are open to the public and investors do not have to be state or local residents to participate. Occasionally, tax liens and deeds are sold over-the-counter, mostly unsold liens or deeds from the auction.
The successful investor of tax liens or deeds will need to know when and where the auctions are conducted and the procedures that must be followed. Although much of the information is available online, a potential investor may need to contact the county treasurer to find out specific information on auctions and procedures for buying tax certificates or deeds. Any potential investor would also need to conduct thorough research on the local properties and market, and the investor would also need to know the state and local laws regarding tax liens or deeds and the procedure for clearing the title on foreclosed properties.
Profiting from tax liens is easier and requires less capital than for tax deeds. Tax liens have the highest priority, even over senior mortgage liens. If the tax lien is not paid, then the holder can foreclose on the property.
Tax deeds originate when the tax authority forecloses on the property and actually owns the property. Therefore, buyers of tax deeds will actually be buying the property, usually for considerably less than the assessed value.
Like tax liens, tax deeds are sold in auctions, and sometimes over-the-counter. Investors can find the procedures for bidding on tax deeds either online, usually at the county's website, or by contacting the county treasurer's office.
Tax deeds are generally quitclaim deeds, sometimes called a sheriff's deed, so a major risk with tax deeds is the unknown cost to clearing the title. Most title insurance companies will not cover tax deeds.
Buying a tax deed is riskier than buying a tax lien, for the buyer is essentially buying the property and will have all liabilities of that property. Hence, insurance must be purchased and taxes must be paid on the property. For this reason, tax deeds require more due diligence, just as if the investor were buying a home. Potential investors should determine why the previous owners did not pay taxes on the property. The property may have little residential or commercial value, or there may be undesirable easements or the property may be landlocked, meaning that it cannot be accessed over public roads.
Winning bidders of tax lien sales usually receive certificates for the tax liens, which may have to be returned if the property is redeemed. Winners of tax deeds will receive the deed, that may have already have been recorded. But if the deed was not recorded at the county's recorder office, then the investor must record the deed. Additionally, tax deed holders may have to pay current taxes and all taxes for subsequent years for as long as they own the property.
To take legal title to a property, it must be foreclosed. However, there will probably be clouds on the title. Moreover, the deeds to properties sold in tax deed sales are quitclaim deeds that convey only the previous owner's interest in the property, but does not necessarily guarantee clear title. Therefore, deeds obtained through foreclosure and tax deeds should usually be perfected by filing a quiet title action in the appropriate court, since a property with a clear title is more valuable. The lawsuit and the summons are served on the property owner and anyone with a recorded interest in the property, such as a mortgage company. If the previous owner died, then a notice must be published in the local paper, so that any creditors can file a claim on the estate, which will include the property. When the court determines that all required notices were published, and the redemption period has expired, then the court will adjudicate that the title is clear and free.
All three of them were purchased with quitclaim deeds, and then the original owner bought it in 1980 with a warranty deed. You would have to go back, and you want to search the property owner from 1980 to 1985, and look at any liens and encumbrances from 1985-1995, 1995-2005.
Now, earlier, I had mentioned that we have tax lien states and tax deed states. There are a couple of them that are what they call hybrids, where they do liens and deeds. That would be Florida, New York.
This video features presentations from the Clerk & Comtproller, Property Appraiser, Tax Collector and a private attorney. This forum provides in-depth information on property taxes, tax certificates, and tax deeds.
Paying property taxes may be an unpleasant chore for most people who own residential or commercial property, but those tax payments are what allow the city and county government to provide public services such as street repair, fire, police and emergency services. When property taxes are not paid on time, most state or county governments have the authority to sell either tax liens or tax deeds as a way to collect the money owed.
Tax liens are sold to investors with the promise of interest or penalty fees as profit when the lien is paid back by the property owner. When tax deeds are sold, however, the ownership of the property itself is auctioned off to investors and the original property owners usually have no way to retake ownership.
This means that when the debtor quitclaimed the property interest the person who took title obtained took it subject to the recorded lien and Child Support Services can still assert a support lien on that property. This frequently happens in divorce cases, where the child support payer quitclaims the property in dissolution of marriage to the former spouse, who takes the property subject to the support liens. If the escrow involves a property where quitclaim deeds have been filed, a name search will need to be performed for the grantor of the quitclaim to avoid problems and future litigation. 041b061a72