Harris County Tax Sale Auction

As an engineering firm knowledgeable in residential construction, remodels and permitting real estate investing in distressed homes seemed like a good fit for our company.

Being able to get the right property at the right price, however, proved more challenging than expected.

After researching online through various forums and videos, it was decided that that the County Tax Sale Auctions was a good place to start.  No proprieties were procured this round but it was definitely an enjoyable experience.

Here are some key items that should be considered before jumping into a tax sale.

  1. Be familiar with the “redemption period” in your state.  Texas has a redemption period of up to 2 years for Homestead properties and 180 days (6 months) for all others.  The way the tax code is written in Texas is that if the owner (the original owner that had their property auctioned) wants to redeem their property they will need to pay the purchaser the amount paid + 25% if in the first year or + 50% if within the 2nd year of the redemption period.   Plus all misc. fees, taxes and repairs “required by code”.  No upgrades.  Documentation is key..just in case.
  2. There are thousand of people looking for the same deal you are.  A lot of the auction properties (especially the most desirable ones) all seem to mysteriously disappear (cancel) before the auction date.  While I have no proof, I suspect investors make contact with distressed owner and strike a deal.  Paying back back taxes and getting the property sold to them.  Unless you are ready to cold call and knock on doors, be prepared to have the property you are interested in be no longer available.
  3. Not all liens are settled in the tax sale.  Your county clerk website is a valuable source of information.  Typically the taxes covered in your tax bill are covered but it may have other construction liens or even a MORTGAGE lien!
  4. A mortgage company may pay you off to be able to foreclose on the property.  So not always a bad thing.  You can always pay off the lien as well.
  5. Research the property.  Get to know a little about how a subdivision is legally described.  Blocks & Lots.  Find in on a map.  Make sure it makes has access and that it has roads to it.  Some old properties have maybe been platted for a subdivision that was never completed.  Could be just wooded lots land locked.
  6. The registration for Harris County was painless.  Took 5 minutes.  Got to the registration check in table, gave form and my registration/bidder number was printed.
  7. As far as payment in Harris County goes, only cashiers checks, money order or cash.  Any over payment will be processed back to you in  few weeks.  What some people do is get $20k and $10k cashiers check and cash as well.  That way they are able to pay the exact amount as well as not carry around so much cash!
  8. The auctioneers are not professional auctioneers.  They are usually sheriff deputies or some kind of admin associated with the constable precinct.  That said, there is no natural flow to how bets are increased or even executed.  It typically increases in denomination of $1k.  Sometimes $5k.  In all however, the process is fair.  Everyone that wanted to bid had every opportunity to do so.  It wasn’t chaos as some may think.
  9. In Harris County, properties are separated by Precinct.  They will have the list available online.  On the day of auction, they will also be posted on large printed sheets of paper in a few areas of the center.  It will be handy to take a photo of the sheet you are interested in and go find a good spot.
  10. There are plenty of novices and professionals.  Established investors with deep pockets going after the prime to the regular Joe buying trying to buy the abandoned lot on his block.
  11. A lot of title companies have policies on being able to offer you title insurance on a tax sale.  Even if only a 6 month redemption period you may find that you will have to wait up to 1 year before even being entertained by a title company.

So anyway, good luck out there!

~J. Rocha