Tax sale auctions are a great opportunity to buy property at a discount. However, just like purchasing any type of property, there are risks. If this is your first tax sale auction, there are a few things you will want to do beforehand to prepare yourself. As there is limited information heading into a tax sale, for newcomers, take your time and familiarize yourself with as much as possible before the day of the auction.
Let’s learn how to prepare for a tax sale auction for the first time.
1. Find Out About New Tax Sales
If you’re looking for tax sale Ontario auctions in a specific area, you can find them listed sometimes on social media and directly on different websites.
You may want to join any email newsletters or notification services that will alert you to new and upcoming tax sale auctions, ensuring you know what sort of homes are being offered via a tax sale.
2. Researching a Tax Sale Property
Know what sort of property you’re bidding on. While you can’t do a full sweep of the property, you can look at the property’s history regarding any liens or judgments that may come with it.
Do a title search summary. Understand if building or zoning restrictions could limit the use or impact its value. Acquire as much information as possible on what you’re about to bid on.
3. Take The Time to View The Property
You can’t walk through a home you want to buy, but you can look at it from the road. If you suspect unseen environmental contamination or significant property damage, the likelihood of investing more post-sale to fix it is there. When putting together a big tax sale auction, this should be calculated into your total budget.
4. Research The Auction Process
Tax sale auctions follow a set of rules. Wherever you bid, read up on that organization’s rules and understand how the auction process will work so that you don’t come in unprepared. Have what’s needed of you as a bidder to ensure your bid is not rejected for arbitrary reasons.
5. Put In A Bid At Your Preferred Budget
None of us have unlimited funds. Everyone’s working within a budget. While a minimum bid amount is included on every tax sale property, the person who submits the highest bid gets the property.
Be sure to put in a bid that is fair for you and the property, with the awareness that a tax sale auction is unlikely to conclude with the minimum amount.
6. Talk To Your Lender Weeks Before
Unless you are paying with your funds, you will need to finance a tax sale auction bid just like you would if you set up a mortgage on a standard property. Get pre-approved for a loan before the auction and discuss with your lender, i.e. your bank, what you intend to do and what funds are required.
7. Have Sufficient Funds At The Ready
You can’t bid money you don’t have. You need to be ready to make a big at a tax sale auction and have the money available to complete the transaction more or less on the spot. Money must be presented in cash, money order, bank draft, or cheque certified by a bank or trust corporation. This should be planned and arranged days beforehand to ensure no delays.
8. What Happens If You Win a Tax Sale Auction
If you are the highest bidder, you will be required then and there to pay the amount you bid, applicable Land Transfer Taxes, and all other taxes on the property. This occurs immediately. If a money order or certified cheque is more than the amount you’ve bid, the municipality can issue a cheque for the difference and do a similar reimbursement form. A receipt is then provided.
9. How a Tax Sale Home’s Title Is Transferred
After payment is complete, the Treasurer prepares a Tax Deed identifying a person of your choosing as the property’s new owner. This document needs to be signed by that person.
Then, the deed needs to be commissioned by the Commissioner for Taking Oaths. This is done either at the treasurer’s office or by mail. Lastly, the deed must be registered at the local land registry office. After it is registered, you are officially the new owner of the tax-sale home.
10. When People Are Living In A Tax Sale Property
Know your rights as a property owner. If you buy a house at a tax sale auction and there are people still living there, the municipality is not obligated to evict them. You will need to hire a lawyer to start the legal eviction process. It may take time and money to evict past homeowners or tenants, which is something to be aware of heading into a tax sale auction.
