OSFP via Auctions

A deal! A bargain! A steal! Thats what I’d love to find in our search for paradise (OSFP).

There are auctions of land all over the country on a daily basis. Property liquidations, estate sales, foreclosure sales, tax lien sales, and tax sales.

What I have found is that property liquidations and estate sales usually sell just slightly below market value, foreclosure sales typically sell around their minimum bid here in Ohio of 2/3 their assessed value. Each of these are great if you have the cash on hand as you are still saving money! As I stated earlier, I’m not just looking to shave a few dollars off, but to get a veritable steal! This is where tax lien sales and tax foreclosure sales come in.

With all actions it is advisable to visit the site prior to the sale, however, sometimes that is not possible and you will have to get creative to  gather the information you need to decide if the risk is worth the reward.

Tax liens sales are a tricky thing to understand and only take place in certain states. These types of auctions occur when a property owner is behind on their taxes. I’ve done some research on these, but haven’t pulled the trigger yet in actually purchasing any liens. When you buy a tax lien, you are actually purchasing the owner’s backed taxes from the county or municipality. if and when the owner of the property pays their taxes, they must pay you, the lien holder, the back taxes owed plus either a penalty or a stated interest rate. Every state is different on how much the rates and penalties are, and how the interest accrues.

Additionally, there are different ways in which the biding is held, bidding down the interest rate paid, bidding a premium on the lien, and others. I highly recommend researching the process in the specific location you wish to bid and be sure you completely understand it before putting your money on the line. So in reality, a tax lien is a secured, but highly illiquid investment! If the owner pays off the lien, you get your money back plus interest. If they don’t, after a specified period of time, often several years, you can redeem the lien to own the property! Their is a legal process to go through, but for literally pennies on the dollar, you can have obtained a property! I recommend going to your local library and researching this topic before taking this leap! If you can’t afford to be without the money you invest and simultaneously not having the property in hand for several years, I would not purchase a Tax Lien.

My favorite is the Tax Deed Sale! Again, these properties have back taxes owed to a county or municipality, but this time, if you win the Auction, you own the property outright! (Except NM, in which mortgages still remain). In many states that have this type of auction, Tax Deed Sales only require a minimum bid of the back taxes owed! Other places it is more, such as 2/3 value in Ohio. Most auctions are done in person at the county courthouse, however, many of California’s Tax Deed Sales are held on Bid4Assets.com. In order to bid, you must submit a deposit that is refundable if you do not win the auction.  I’ve seen deposits range from $250 (plus $35 fee) to $5,500!

Last month I followed several properties in the remote high desert of NE California that sold very affordably! The deposit we had to put down for the right to bid was $285. One specific item that attracted our attention was a 40 acre property above the valley floor part way up a small mountain. It was partially wooded and had a roadway that wound by the property. It was quite steep in places, but still possibly usable for homesteading (at least I was betting on it). We bid $3,700. The winning bid… $3,800. Several more mountainous acres nearby sold for under $5,000!  There was even a 160 acre parcel in a very remote area.  It was partially wooded and partially open on top of a hill.  Part of the property went into a reservoir it bordered.  This sold for under $30,000!

Two 20 acre plots that we bid on were much more congenial to farmsteading with much gentler slope, sold for under $6,000! Again, these were very remote and about a 30 minutes drive from a couple of small towns of less than 1,000 people, and quite modest size towns were 1 hour plus away. Also, the land was in the harsh growing environment of the high desert with only about 90 days of frost free growing annually and 9-14 inches of rainfall.

Today, there was another tax sale online in North Central California olive growing country. Several properties were only 15 minutes from a small town with a population of 7,600 people. The three properties I watched ranged from 18-20 acres. They sold for just over $15,000, $25,000, and $35,000 each!

Watching these tax sales has been a tantalizing experience! I know with just a little bit more cash we should be able to get some kind of land! Going sight unseen (not counting Google Earth Pro and Google Street view that is) is a risk, but the rewards may be great!

Have any of you had experience buying land at auction?  What do you think you saved at auction compared to through normal means, if anything?  Please share in the comments!

“If you are not willing to risk the unusual, you will have to settle for the ordinary” – Jim Rohn

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