As you now know firsthand, obtaining a property through a tax sale can be an exhilarating experience for investors, especially if the property was acquired at a favorable price. However, the journey doesn’t end once the auction is concluded. There’s a slew of important steps to follow to ensure a smooth transition and to maximize the potential of your new asset. Let’s delve into what to do after you’ve secured a property via tax sale.
- Understand Your Right of Possession
First and foremost, understand when you can take possession of the property. In Missouri, there is a 1-year redemption period for properties sold for either the first or second time at tax sale. There is a 90-day redemption period for properties sold at a third tax sale (or later). This redemption period begins once you have provided the necessary notices to the original owner. During this period, the original owner can repay the owed taxes plus interest on the amount of tax owed and reclaim their property. To learn more about the redemption process and obtaining a deed for the property in order to have a right of possession, please read one of our previous blogs by clicking here.
- Secure and Inspect the Property
Once the redemption period has expired and the deed granting you possession has been recorded, your next step should be securing the property. Change the locks, secure any broken windows or doors, and, if necessary, set up a security system. After securing, conduct a thorough inspection. This will help you identify any issues, like structural damages or pest infestations, that might need immediate attention. Consider bringing a trusted contractor with you during this visit. You can either bring one who will come for free in exchange for a hope that they will get the job making the repairs, or you can pay for one to come give you an independent assessment and then bid out the work.
- Address Legal Matters
- Quiet the Title: In many cases, properties obtained via tax sales come with ‘clouded’ titles due to potential liens or claims. You might need to initiate a ‘quiet title’ action in court to clear any ambiguities and confirm your clear ownership. The County makes no warranty of title in the deed it issues to you, so even clearing the name of the owner who lost the property to the County in the tax sale often needs to be handled with Quiet Title Suit.
- Unlawful Detainer: If the property is still occupied by the former owner or tenants, or by squatters, you might need to initiate an unlawful detainer proceeding. Always follow the legal process and consider consulting with an attorney to ensure you’re compliant with local regulations.
- Assess the Financial Implications
- Understand the ongoing costs associated with the property:
- Property Taxes: Make sure all future property taxes are paid on time to avoid finding yourself on the other side of a tax sale.
- Insurance: Ensure the property is adequately insured. Ideally, arrange for home owners insurance to take effect on the date the deed is issued to you by the County.
- Maintenance and Repair Costs: Budget for any immediate and long-term repairs, as well as ongoing operating expenses and assuming a reasonable vacancy rate.
- Plan for the Property’s Future
- Decide on the primary purpose of the property:
- Immediate Resale: If the local real estate market is thriving, you might consider selling the property immediately – potentially to another investor who is interested in flipping the property.
- Renting Out: If you’re eyeing a steady stream of passive income, turning the property into a rental might be the right move.
- Renovations and Flipping: For those with a knack for renovations, the property can be transformed and then sold at a higher price.
In conclusion, obtaining a property through a tax sale is only the beginning. The subsequent steps, from ensuring legal clarity to deciding on the property’s purpose, are equally crucial in making the acquisition a successful venture. By following the outlined post-acquisition steps and continually educating yourself on real estate dynamics, you can transform your tax sale purchase into a profitable investment. Always consider seeking advice from professionals, such as real estate attorneys, real estate agents, and financial advisors to navigate any complexities. Remember also, that every county has a somewhat different process and timeline for tax sales, though they do all need to comply with state statutes.
If you are considering or already have purchased a property at a County Tax Sale, City Tax Sale, Trustee’s Sale or Sheriff’s Sale, or otherwise have a title issue we might be able to clear up with a Quiet Title action, please reach out to us and take advantage of the flat fee pricing we can usually offer in this area. Contact us today by clicking here, or by calling us directly at 314.862.2237 and letting us know you need a Quiet Title Lawsuit or want to discuss Purchasing Tax Sale Property.