How to Buy a Tax Delinquent Home

Brad Smith
Written By Brad Smith

A tax-delinquent home is up for grabs as a municipality attempts to recover unpaid taxes. Many investors want to buy a tax-delinquent property and use it as an investment tool to recover a return based on interest. Purchasing is done at a public auction or a public tender. Terms and conditions vary based on the municipality. 

If the tax sale occurs by auction, bidders submit offers in person on a specific date in a public setting. Bidders can bid on each other. The highest bidder receives the tax-delinquent home.

Let’s learn about buying a tax-delinquent property.

how to buy a tax delinquent home

Tax Sales By Public Tender

If a tax sale is subject to public tender, bids are submitted by mail. You do not know anyone else’s offer as a bidder and must make your bid without that knowledge. After the deadline, all public tender bids are reviewed, and the highest bidder is granted the certificate for the tax sale home.

You can review the list of tax delinquent properties. Look closely at your municipality’s listings for tax-delinquent properties, reviewing their location, minimum bid amount, and other details. Research the neighborhood. See what property values are in the area and compare them to what is offered.

Research and Due Diligence

You are not granted a home inspection on any tax-sale house, so you have minimal information from which to work. Even so, you can complete a title search to see if there are other claims on it. You can observe a property from public land, such as a public road, and see if you notice anything that might turn you off.

Tax-sale homes and properties are often sold as-is. There is no warranty or return process, and a municipality is not required to vacate possession or provide assurances about the land. When you purchase a tax-sale property, it becomes entirely yours to manage after signing the certificate. As such, you should research tax-delinquent properties to understand their value.

Avoid Complex Tax Sale Homes

Avoid a property with multiple liens. Don’t bid on it if it appears to be overrun down the street. If any warning signs suggest it could prove a complex investment, it’s recommended that you let it be and find another tax-sale property worth your money.

Request a Public Tender Package

You must pick up a public tender package to submit an offer by public tender. This package includes all the forms to be filled out and instructions on submitting an offer. They are typically available for pick up in person at your municipality’s city hall; however, check where you can obtain them.

Seek Out Legal Advice

The municipality will not guide you through a tax sale home. It’s wise to get advice from a lawyer who knows tax sales. They can help you understand legal stuff and risks.

A lawyer can investigate the property’s history, determine whether there are any legal claims against it, and ensure the safety of your investment. They’ll also help with your offer and deal with the complexities that arise during buying. Legal advice is also important for tax sales because of special rules in your area. A lawyer will look out for you, steer you clear of big mistakes, and help ensure everything runs smoothly.

Preparing for the Auction

If it’s an auction, you will be given a date to attend if you bid. If you are bidding by public tender, your offer will be in by the deadline.

Be wise with your budget and do not overbid. Bid on a property with a clear budget in mind. There is no financing. It’s your money that you’re investing. Remember that if you assume ownership, there may be updates, repairs, and renovations to make the tax-sale home livable. Factor that into your budget.

Provide a Deposit with Your Offer

Now, it’s time to bid on the tax-delinquent property. When you submit your bid, you must provide a deposit to demonstrate you have the money available. The municipality specifies the amount or percentage. If you are not declared the winning bidder, the deposit is returned to you.

The Winning Bid

The successful purchaser of a tax sale property only has a specific amount of time to pay, often 14 days or less. The amount owed is the amount tendered, in addition to all accumulated taxes, penalties, interest, GST/HST, if applicable, and land transfer taxes.

If you do not complete the transaction within 14 days, you forfeit your deposit to the municipality and cannot legally recoup those funds.

Owner of a Tax Delinquent Property

After you are declared the winning bidder and have completed the transaction, following any grace period for the prior homeowner to pay the taxes owing, you are only given title to the property. If there is a grace period and the homeowner comes through with the taxes due, your total investment is returned to you plus interest.

smith brad omni

Written by Brad Smith

CEO & Lead Interior Designer

Brad Smith is an experienced interior designer and the founder of OmniHomeIdeas.com. With a Master's degree in Interior Design from Pratt Institute and a passion for creating safe and healthy living spaces, Brad shares his expert insights and innovative design ideas with our readers. His work is driven by the belief that home is where every story begins.