#8 – Overage Play

Now we’ll look at a couple ways to make money AFTER the tax sale, assuming the state has a bidding system at the tax sale where prices can rise above what’s owed.

For example, in most tax deed states, a property is offered for just the taxes owed to start. If it’s a valuable property, several bidders will want it at the low price.

So the competitive bidding begins, and the last man standing gets the property – often for MUCH more than what’s owed!

What Happens to that Extra Money?

What happens if a nice house starts out at $5000 but the bid reaches $75,000 before the bidding finally stops? The county collects $75,000 from the bidder and the bidder walks out with the property (basically). But the county was only owed $5,000 in taxes!

In most areas, that remaining $70,000 is payable to the former owner who lost the property, if they come in to apply for it within a couple years (rules vary state-to-state).

What if YOU Lose a Property to Tax Sale?

I gave you several suggestions for buying properties prior to the tax sale, and for unwanted properties you can get deeds from the owner for as little as $50. However, you must also pay the taxes to bail out the property or you’ll lose it yourself.

It’s better not to pay the taxes right away when you get the deed. Often you can just pay them out of your sales proceeds if you resell the property quickly. But this also leaves you open for the “overage play”.

If your property purchase didn’t go as well as planned (it didn’t sell as expected for example), you should still only have a couple hundred dollars invested at most at this point, and you waited to pay the taxes.

Just let it go to the sale! If a bid for more than the taxes owed is received, guess what? YOU’RE the owner who gets the surplus!

Jack Bosch, a Phoenix tax sale investor, made an entire course on this stategy – pretty cool! Check it out here

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