Similarities and differences with mortgage foreclosures

Both foreclosure sales and tax deed sales are the forced sale of a defaulted property, as per the agreed terms or legal requirements. The Sovereign Tax Department undertakes such sale to recover the dues of property tax and related interest, unlike the foreclosure proceedings, where the lenders restore to such sale for recovering principal loan or interest in default. The tax deed sale is in the form of a publicly held auction, failing which the property can be sold through a private placement.

• Screening of options. The preliminary step should be to research thoroughly, the available options. You can refer to various online public databases or published classifieds. You can pick out the properties based on some initial broad-based criteria, like budget, location, and so on. This helps greatly in choosing the right one from a narrower group of options.
• Inspection. Try to visit the site personally and refer to some expert, if possible. Self-inspection is an indispensable step towards purchasing a foreclosure property to identify any unapparent flaws or maintenance issues associated with it. This is becomes more significant, given the size of the outlay related to investment in real estate.
• Redemption period. The tax deed sales in almost all the cases provide for a redemption period, within which a defaulter can reclaim his/her property, after repaying the auction price and the penalties thereon. The time limit can range between small to medium terms of 6 months to 2 years, before the provision being rendered time-barred.
• Foreclosure Laws: Seeking advice of an expert, experienced in foreclosure sale matters is highly recommended. The legal requirements in connection with the process of foreclosure sales are much complex. The different states have different regulations covering such transaction and this adds to complexities considerably.

• Discounts. The Government, instead of a commercial entity, initiates tax deed sales and the target price is composed of delinquent taxes, penal interest, legal costs, and other expenses. This results in minimum bid prices that are much lower than the intrinsic value of the property.
• Returns. If you sell the property to a third party later, you are more than likely to reap in big profits, mainly on the account of capital appreciation over the auction purchase price.
• Maintenance. If you remain alert to significant aspects, like the physical condition of the property before and while making the purchase, you can easily save large outflows in the form of repairs and maintenance later.