Nov. 28, 2022
Are you interested purchasing a property at an Indiana county tax sale? If you’re new to tax sales you will need to learn the process before going. You will also need to research your properties before the sale so you know what you are purchasing.
Once the taxes on a property have not been paid for awhile the property will end up on the tax sale list. As it gets closer and closer to the sale many of these properties will fall off the list as the owners pay the tax bills. So its best to wait until the week before the sale to really look at the properties you are interested in, otherwise you end up looking at a bunch of properties that end up not being sold.
Each county handles the sale slightly different, but the general rules are the same. Payments for anything you purchase are due that day. You are not receiving the deed, you are receiving a certificate that entitles you to the deed one year later if the owner has not paid the back taxes, and you have followed the requirements for notifying the property owner and lien holders (more on that later).
When bidding at the sale its common for a handful of people to win 80% of the parcels because there are experienced investors that go county to county. A common misconception is that these can sell for pennies on the dollar, which really never happens. A home worth $300,000 might have $7,000 in back taxes, but will still sell for maybe around $200,000 to $240,000. If the property has a mortgage on it, you can bet that the mortgage company is going to pay back the taxes, because they are not going to lose their collateral (the property) over a few thousand dollars in taxes.
If you do end up being a winning bidder you pay your bid amount and get your certificate. From there you are guaranteed at least 10%/15% of the actual tax amount you paid if the owner redeems. If the owner redeems within 6 months you get the 10%, or if its after you get the 15% amount. Additionally, you get 5% per annum on the overage amount. So if the back taxes were only $2000, but you paid $20,000, then you get 5% prorated annually on the overage amount based on when its paid back.
Once you get to day 30 after the sale, if the property has not been redeemed you need to get your tax sale attorney working on it. You will order a title search and your attorney will send certified mail to any owners and lien holders that show up on the title search. The costs of the attorney and title search costs will be repaid to you if the owner redeems as long as you fill out the 137B form and get it to the county to notify them of the additional costs incurred. Any new property taxes that come due during the one year process should also be paid by you, and you also file the 137B form for those as well. All these expenses are refunded to you with interest if the owner redeems before the one year.
If you have made it the full year without the owner redeeming your attorney can file with the courts for the deed. Once you have the deed it should be noted that reselling the property can be a challenge from a title insurance standpoint. Almost all title companies will not offer title insurance on tax deeded properties for 3 years. In order to clear the title sooner you usually have to file a quite title suit against all interested parties from the title search to fully clear the title. Or you can just hold onto your property and let time do its thing.
I have personally purchased a number of tax sale properties and have received the deeds on several (while others were redeemed by the owner). I personally go for vacant land/lots because the prices are cheaper and resale can be a little easier. My three best deals were purchased for $250, $2300, and $2600 plus about $500 each in title search/attorney fees. I sold these for $12,500, $17,000, and $17,000. Because these were less expensive properties the buyers were ok buying these without title insurance, but for expensive property or homes you can bet that the buyers are going to want title insurance.
Do you have questions about Indiana tax sales? Feel free to send me a message or give me a call. I have purchased many of these properties and can generally answer most questions. Happy Investing!
Related: Indiana Sheriff Sales Explained
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