How We Got a $45,000 Payday From a Tax Sale

We buy lots of houses from tax sales. This is the story of one of those houses.

A retiree moved from New York City to Pennsylvania and paid $150,000 all cash for a nice 1,700 square foot house. It was all brick, had a large two-car attached garage, nice level yard, two fireplaces, and almost the entire lower level was also finished (adding almost another 1,700 square feet of finished space).
You certainly couldn’t find anything like that for that kind of money in New York City.
After living there for five years, the retiree passed away. Some family members moved into the house, and since the house was owned free and clear of any mortgage, they lived there without having to pay rent or mortgage payments.
They did have to pay the real estate taxes owed, but they didn’t pay them. This went on for a couple of years. They lived there for free, paying some of the utilities, not paying others, and not paying any of the real estate taxes.


When you don’t pay your property taxes, sooner or later the government decides to take the property to tax sale to recoup some of the taxes owed.
The law says that the property will be sold when the delinquent taxes become more than two years old. The law also says that the delinquent tax payer is to receive three legal notices before their property can be sold for delinquent taxes.
So we saw this house on the tax sale list published in the newspaper one month before the tax sale. The list is huge and contains thousands of properties that are two years delinquent in real estate tax payments.
From this list of thousands of delinquent owners, about 90% will pay what they owe to have their property removed from the list by the day of the tax sale.
It’s really hard to work on the sale because of this time crunch and the fact that 90% of the properties will be removed from the sale, and you can not buy them.
We poured over that list, trying to shift through the good, the bad, and the downright ugly. There’s no magic way to determine which 90% will pay their taxes and remove themselves from the tax sale list even at the last minute.
It’s surprising how many people wait until the very last minute to pay. At some tax sales, people are still paying their delinquent taxes during the auction. Why wait until the auction day to pay your taxes? What if you had a flat tire, ran out of gas, or couldn’t find a parking space at the courthouse? That could be the difference between keeping your property and losing it to a tax sale.
Because the tax sale is so difficult to work, it’s that much more rewarding when you do find that needle in the haystack. Here are three absolute, formed-in-concrete rules for buying property at the tax sale:

1.  Visit the property in person.

A lot of people look at Google Earth or other places on the Internet to see photos of properties. We never depend on any Internet tool. Here’s why.
At one tax sale we attended, the house had burned down a couple of days earlier. People at the sale were bidding on a house that had already burned down–and they didn’t know it. Always actually see the property.

2. Do your “due diligence” on the property.

A title search is a basic necessity as well as a check of zoning, flood plains, wetlands, restrictions of deed, protective covenants, endangered species, and much more.

3.  Know the rules of the particular tax sale you’re working.

At this particular sale, all the mortgages, liens, judgments, etc. transfer to the buyer. If you buy a house with a mortgage at this sale, that mortgage is still against the property and is now your responsibility to pay. You will not be able to sell the property or refinance the property. And if you ignore the mortgage, you could be subject to a foreclosure.
We had a title search done on this house and knew prior to the sale that there were no mortgages on the property.

4. Set your highest bid amount in stone and don’t budge.

There were other professional bidders at the sale who have successfully bid on multiple properties at multiple sales, often for many years. The minimum opening bid was about $7,000, which was the amount of taxes and fees owed.
Bidding was fast and furious. The auctioneer went to $10,000 increments right away. Bidding moves really fast when each bid is $10,000 higher than the last. You have pay attention and focus on the auctioneer, or you will either pay too much for a property, or lose a property to another bidder. We prevailed, and were the high bid at $55,000.
Right after the sale, we visited the house again, looked it over critically, and decided it was worth buying at the right price. The house was now vacant.

How We Got a $45,000 Payday

After clearing the title, we proceeded to fix the house up for sale. There was lots of stuff in the house. We rented a 30-yard dumpster, and filled it with junk.  There were also metal products that went to the salvage yard, and vegetation, trees, and shrubs that went to the mulch place. And there was still stuff left over.
The real solid hardwood floors were in good condition in a couple of rooms but bad condition in other rooms. We got an estimate for refinishing the hardwood floors of about $4,000. We decided to go with wall-to-wall carpet from the big box home improvement store instead.
We had the bathtub, originally pink, re-colored to white and also had the same company re-color the bathroom ceramic tile walls, bathroom vanity/sink, as well as the kitchen countertop and backsplash.  Our re-coloring cost about $2,600. This is a lot cheaper than replacing everything, and it takes a lot less time.  They were in and out in three days.
The entire house needed to be repainted, and that costs about $3,000. We had new vinyl flooring installed in the kitchen and bath, again from the big box store. Landscaping and getting rid of overgrown shrubs helps the curb appeal and uncovers the house previously hidden. An old-school landscaper I know always says that old shrubs make a house look old and new shrubs make a house look new.
There was some electrical work and some other maintenance items. We anticipated the hard costs of remodeling being about $25,000 and soft costs being about $25,000. (Soft costs include utilities, insurance, real estate commission, buyer closing cost help, transfer taxes, and other holding costs.)
We sold the property for $150,000 for a profit of $45,000.


  1. Sheena Prattis on November 1, 2013 at 6:43 pm

    It’s always great when an investor (1) has $55,000 cash to secure a tax certificate/lien; and (2) find a property where the home is actually paid off. That’s a guaranteed profit of at least 100%.
    What would be your advice for people who are boot-strapping their way to the $55,000 cash range? Most people cannot begin with that amount of $$.
    I would love to invest in tax certificates but just don’t have the $$ to compete with the big-wigs. I would also like any advice you’d have to offer in this category. The closest I could get to real estate investing was getting involved in the mobile home business I started a business called Make it a Mobile, to assist people who are interested in buying, selling, or financing a mobile home. My ultimate goal is to eventually get into the tax certificate investment business, and probably even buy a mobile home park. I know there are numerous ways to begin investing in real estate; I just need to figure out which method is right for me.

    • Alexander Burnett on May 5, 2014 at 3:01 pm

      Partner with people who have the money.
      You need to make sure you understand the process of buying Tax Sales/Tax Deeds. A Tax Certificate is not the same as a Tax Deed. Then you must make sure you understand the entire process of buying at auction.
      One wrong deal can be very expensive.

  2. Gina on May 5, 2014 at 5:51 pm

    I have heard you can buy tax liens for just $50.00,is this true?

By David Krulac

Specialize in single family homes, small apartment buildings, scattered vacant lots and subdivisions and land development of both farm land and wood land. Experienced in foreclosures, REOs, Short Sales, HUD and VA sales, public auctions, Life Estates, real property ownership within retirement accounts like IRA and 401K, Rehabbing, marketing, repurposing, mixed use and commercial property. We also have worked with problem properties of both title and septic issues and have professional referrals for those situations. Much of our business is first time home buyers, referrals, repeat customers and clients as well as investors