1. Determine when the Auction takes place. The first step in purchasing a property at a tax sale is to attend the tax sale. Tax sales are held by the county in which the auctioned property is located. The easiest way to determine the date and details of the tax sale is to check the County’s website. For example, the County of Los Angeles Treasurer and Tax Collector has an entire webpage directly tailored to informing the public of the date and details of upcoming tax sales.
2. Research the for-sale properties. The traditional real estate purchase process involves a number of procedures through which a prospective purchaser learns details about the property. For example, a purchaser can attend an open house, receive a private showing, and include contingencies in the purchase and sales agreement. In a tax auction, the purchaser loses the ability to conduct these types of due diligence. Instead, the purchaser should conduct as much due diligence in advance of the auction as possible. For example, in Los Angeles, the Office of the Assessor provides a portal whereby anyone can search important details about properties by inputting the address or APN number. For example, this portal can be used to determine the year the property was built, zoning, easements, etc. While there are inherent risks involved with purchasing a property at a tax sale, performing one’s due diligence can help mitigate the downside.
3. Who may purchase? Generally, any person may purchase a property at a tax sale. This includes anyone with an existing lien, claim or other interest in the property. (Revenue & Tax Code section 3691) However, there are some statutory exceptions that prohibit government individuals such as a tax collector purchasing a property at a sale conducted by him or her. (Gov. Code section 1090)
4. Review the tax deed properties the night before the auction to see if any have been redeemed. Even if a property is set to be sold at a tax sale, the owner of the property has a right of “redemption”. The right of redemption generally permits the past-due owner to pay the back-taxes and save the property from the auction block. The owner of tax-defaulted property has the right to redeem the property up until 5:00 p.m. on the day prior to the tax sale. Accordingly, on the eve of the auction, the prospective purchaser should consult the list of properties set for auction and make sure his or her target property has not been redeemed.
5. There is always a minimum bid. The minimum bid at a property tax auction is the amount necessary to redeem the property from the delinquent property taxes, plus costs and the outstanding balance of any property tax postponement loan. (Revenue & Tax Code section 3691) Additionally, there may be other costs imposed by the county in which the sale is conducted. If the property does not receive a minimum bid, the property will be re-auctioned at a subsequent sale. If this occurs, the tax collector has the discretion to set a lower, appropriate minimum price at the subsequent sale. (Revenue & Tax Code section 3698.5(c).