How to Start Investing in County Foreclosure & Tax Deed Auctions, & Wholesalers

How to Start Investing in County Foreclosure & Tax Deed Auctions, & Wholesalers

How to Start Investing in County Foreclosure & Tax Deed Auctions, & Wholesalers

The fact that you’re reading this article shows that you have more than a passing interest in Florida county real estate foreclosure auctions and Florida county real estate tax deed foreclosure auctions.

Your interest should be piqued as the aftermath of COVID-19 will probably leave In some parts of Florida a ravaged Real Estate market.

As a new investor, you’re probably wondering what your options are. You may have a vague idea of what Florida county real estate foreclosure and tax deed auctions are and how they operate, but gaining a complete understanding of their inner workings can be tricky.

Nuances of Starting to Invest Using County Auctions

After arriving in Florida many years ago, I (a seasoned real estate investor) was astonished by how different the look, style, and operation of county real estate foreclosure and tax deed auctions was from California, Colorado, and Kansas! 

Some of these differences defy logic and make no sense at all, but once you master them, there are riches to be gained.

Crucial to understanding county real estate foreclosure and tax deed auctions is education, education, and more education. PropertyOnion.com is a great resource for not only finding real estate but also learning about county real estate foreclosure and tax deed auctions in general. You can count on PropertyOnion.com to guide you through your real estate investing journey.

Now that you’re staring through the window of opportunity, you have to assess your options and decide where to start. I suggest the very beginning! 

If this is your first rodeo dealing with county real estate foreclosure and tax deed auctions, I recommend starting small. That way any mistakes you make (although reading all of the articles and watching the videos on PropertyOnion.com will help you avoid most) will be small. 

Start Investing in Your Backyard

Before you take on the challenge of finding real estate at county real estate foreclosure and tax deed auctions, the first step in my humble — but tried and trusted — opinion is to seek out an area that you are familiar with. Let’s call this your “farm area.”

If you are new to Florida or are operating from afar, this can present a problem. In that case, try picking an area through whatever means you feel comfortable with, draw a ten-square-mile radius around it, and start to study the real estate within it.

Local or recently acquired knowledge of an area that you have lived or worked in will give you a distinct advantage when it comes time to bid at auction. You will immediately know where to find the bus stops, train station, library, schools, swimming pool, local areas of worship, and all the amenities that would be attractive to someone looking to live in the area. Knowing where these facilities are in relation to a particular piece of real estate will help shape your judgment about how much you are willing to bid at a county real estate foreclosure and tax deed auction.

I wrote a tutorial in the February 2020 Monthly Peel about farming an area (Real Estate Farming with County Foreclosure Auctions), and I strongly suggest that you refer to this piece. My method will help you find success. 

Push Your Boundaries Beyond Your Backyard!

Thinking you know a particular area is not good enough. Here is a ridiculous suggestion, one that I have employed successfully in the past. 

A few years ago, more than I care to remember, I would take my car and drive around my farm area looking at the different types of streets and the real estate on them. Once I had found some areas I liked and felt comfortable in (don’t ask me why, but everyone experiences this feeling), I would return on my bicycle (yep) and ride the areas.

I referred to these districts as my premium selections. Riding my bike allowed me to look closely at dead-end roads, flag lots, and all sorts of hidden gems from a different perspective than I would get from a car. 

Even if you don’t own a bicycle or want to ride one, you can walk through an area. I call this “walking for dollars,” and it’s another great way to get to know an area.

When distressed real estate comes up at county real estate foreclosure and tax deed auctions within your farm area, you can approach it with much more confidence than someone who has no or very little local knowledge. 

The basics are covered, so let’s look at the different options you have within PropertyOnion.com to secure a real estate deal in a buyer’s market. 

Florida County Real Estate Foreclosure Auctions

The staple diet of many diehard Florida investors consists of county real estate foreclosure auctions, where many people who start with high aspirations crash and burn, while others with the same objectives flourish and become moderately to overwhelmingly successful.

The distinction between the two is how investors educate themselves. Those who go straight into a county real estate foreclosure auction thinking their instinct will get them through quickly find out that it won’t. 

Those who succeed, even though they may be regular or seasoned investors from out of state, apply themselves to the educational process, learning everything there is to know about Florida county real estate foreclosure auctions.

Do Research, Then Do More Research!

Here is my first warning: You must spend a few weeks researching real estate that was successfully won by a third party at a county real estate foreclosure auction and see exactly how well they did (or how poorly).

There is a lot to learn, and you have to begin somewhere. PropertyOnion.com is a great place to start, in tandem with back research on the real estate that you may have wanted to bid on at the county real estate foreclosure auction. 

If you’re confused by the process or don’t understand something that comes up in your research, then consider a PropertyOnion.com premium membership. This allows you to contact one of our experts for one-on-one counseling.

Our team can only answer non-legal questions and cannot cast opinions on whether you should or should not bid on a piece of real estate. 

Due Diligence Is Not a Choice — It’s a Necessity

When you bid on real estate at a county real estate foreclosure auction, you must consider that it may not be free and clear of encumbrances. In other words, there may be other liens and judgments aside from the judgment you are bidding on.

For example, there may be an existing mortgage or mortgages if you are bidding on a Home Owners Association (HOA) foreclosure.

Alternatively, if the judgment you are bidding on is for a second mortgage with a first mortgage still in place, you will be responsible for the first mortgage debt should you be the successful bidder. If you have won a bank foreclosure, you are on the hook for any outstanding HOA liens, delinquent real estate taxes, mechanical liens, or IRS attachments.

These are just a few of the encumbrances you may find attached to real estate at the county real estate foreclosure auction. Winning the bid on a final judgment does not mean other debts disappear.

You can see how some people — the ones who did not think education was necessary — came to grief. As daunting as this all may seem, help and assistance is at hand as PropertyOnion.com has a Title Search Department.

Once you have found desirable real estate that you would like to bid on at one of the county real estate foreclosure auctions, PropertyOnion.com can supply you with an O & E report (Owners & Encumbrances) that will detail all open (outstanding) judgments and liens. This will assist you in determining the amount of your bid at the county real estate foreclosure auction by deducting the debt from the real estate value. 

I know that many of you reading this article are taking a nervous gulp and scratching your head, but once you get to know the rules and procedures, you’ll find gold in them hills. 

Florida County Real Estate Tax Deed Foreclosure Auctions

A lot of PropertyOnion.com new investors, not to mention county real estate foreclosure veterans, prefer the calmer waters of Florida county real estate tax deed foreclosure auctions.

But warning number two: There are sharks circling, and they can bite you hard.

The rule of thumb with Florida county real estate tax deed foreclosure auctions is that all private debt is expunged when you buy a tax deed. However, all state and federal encumbrances remain.

So, what is a tax deed, and how do they come about at a Florida county real estate tax deed foreclosure auction? 

A Tax Deed Sale Originates from Unpaid Real Estate Taxes

Each year the county tax collector collects delinquent real estate taxes at tax certificate sales. This procedure is carried out by auction and a winning bidder receives a tax lien certificate, which means the homeowner has a lien on his real estate for the delinquent taxes.

The winning bidder will be paid interest on the tax lien certificate at a predetermined interest rate, which fluctuates from time to time and county to county. 

The homeowner has up to two years from the date the taxes become delinquent to pay off the tax lien certificate with all the interest, legal, and administrative charges.

If the homeowner fails to pay off the tax lien certificate within the two-year time period, then the owner of the certificate can apply to the county court for a public auction of the real estate for which they hold the lien.

This is called a tax deed sale, and the proceeds from the sale will pay off the tax lien certificate with any overage (the real estate could sell for more than the tax certificate’s value) going back to the homeowner who unfortunately has lost their home to the winning bidder. This is where you come in.

County Tax Deed Foreclosure Auction Hazards

Warning number three: There are some peculiarities surrounding tax deed sales. For instance, you have to remember that a tax lien certificate covers a specific time of delinquency. There may be other tax certificates associated with the real estate covering more recent periods that have yet to be foreclosed upon or delinquent debt that has not yet crystallized into a tax lien certificate. These must be paid off in full. 

This happened recently to an experienced PropertyOnion.com long-term premium member who forgot to check for delinquent water utility bills — this cost her over $3,000.

How did this go undetected? If the water utility company does not record a lis pendens or lien at the county court, there is not an O & E report in the world that will be able to pick it up. The winning bidder must check this for themselves.

I throw this story into the mix so you understand it’s not all smooth sailing in uncharted waters. Education and proper execution of procedures are of paramount importance to a successful conclusion of a county real estate tax deed foreclosure auction. 

There are many more elements involved in county real estate tax deed auctions. I haven’t even touched on why you need a quiet title action after making the winning bid! However, the sole purpose of this first article is to establish a beginner’s guide to county real estate foreclosure and tax deed auctions with a brief explanation of what you can expect from each option.

In future issues of the Monthly Peel, I will give you a more detailed explanation of each section and subsection so you have a better understanding of all the procedures and due diligence processes. 

Florida Real Estate Wholesaler Deals

We have a very large group of genuine wholesalers covering many of Florida’s counties, featuring a multitude of real estate.

Some are free and clear of encumbrances while others are not, but you should approach all circumstances with caution. It will be up to you to conduct your due diligence.

For those of you who do not know how the wholesaling of real estate here in Florida works, I will explain.

A genuine wholesaler (and many are not genuine — more on that later) markets their service through many different methods to attract sellers. These methods include:

  • Google AdWords campaigns
  • Email blasts
  • Postcard mailings
  • Bandit signs on the side of the road
  • Telephone campaigns
  • Leaflet drops
  • Sophisticated radio and TV adverts

All methods are usually supplemented with a professional-looking website.

The object of the business is to engage a homeowner who is usually in a distressed position — perhaps they are experiencing financial issues, going through a nasty divorce, or suddenly relocating — to accept a below-market cash offer and sign an assignable contract with up to a 30-day inspection, and sometimes longer. This gives the wholesaler time to advertise the real estate at a higher value than the contracted price with the homeowner (seller).

You may be aware of a company called We Buy Ugly Houses. The wholesale real estate business runs the whole gamut from this type of operation down to one-man bands, but all are a variation of the same thing.

Good wholesalers have a well-developed network of investors (referred to in the wholesaling world as wholesale buyers) who are willing to take the real estate from them on an “as is” basis, with no or a very short inspection period.

Once the wholesaler has his buyer in a separate contract, the original contract with the homeowner (seller) is then closed by the wholesaler, who then closes his contract with his investor/buyer. The wholesaler’s profit is the difference between the two contracted prices.

Good wholesalers are doing this multiple times a week. I know some who close up to 20 contracts a month on average! 

But remember how I mentioned that not all wholesalers are genuine? Here’s why.

The Dark Side of Real Estate Wholesalers

“Daisy chaining” is a term applied to alleged wholesalers — and they are well-known to us — who take other wholesalers’ deals and details and present them as their own. They offer these deals to their ever-dwindling and changing buying network.

You can imagine the problems this causes. When closing a deal of this kind, it nearly always fails and ends in tears, wasting everybody’s time. 

In extreme cases, earnest money is exchanged and never returned!

Thankfully, you will not have to deal with these people or companies. The team at PropertyOnion.com has taken the time to uncover supposed wholesalers whose only aim is to hurt you. 

All wholesalers shown on PropertyOnion.com are carefully vetted. Their deals also go through a vetting process, and the wholesaler must sign a declaration that all wholesale deals offered on PropertyOnion.com are originally contracted real estate to the wholesaler who is offering them for sale. 

Any violation of this agreement results in a lifetime ban from PropertyOnion.com. 

I will go into more detail on the do’s and don’ts when dealing with wholesalers in future issues of the Monthly Peel

More Ways to Launch Your Investing Career Coming Soon!

I hope you found all of the above informative (and interesting), and I look forward to continuing your education around Florida county real estate foreclosure auctions, Florida county real estate tax deed auctions, and wholesaler deals in the months to follow.

If you have any questions or comments, please leave them in the comment box below. I look forward to hearing from you!

Tony Stern

Born and educated in the UK, Tony began his real estate career in 1976. By 1982 Tony launched a real estate development firm. In the 1990’s he created, acquired & sold several companies including Star Refining an international precious metal refining company with offices around the world. Since 2001 Tony has been investing in all aspects of real estate, concentrating on the Florida foreclosure market. Seeing a need to help investors, in 2016 Tony co-founded, PropertyOnion.com.

2 thoughts on “How to Start Investing in County Foreclosure & Tax Deed Auctions, & Wholesalers”

  1. user namePhilip Kessler says:

    Thanks Tony, this was a great overview and intro guide for new investors. I am looking forward to the follow up articles. I have been seeing the target % profit vary from market to market. Do you have a general % margin goal that you set? Does that % change if you go outside of PBC or South FL, like up towards Brevard or Duval? Is the best indicator just the data that I can pull from previous auctions? Thanks again.

    1. user nameTony Stern says:

      Philip, glad you enjoyed, there is a follow-up article that’s just published on the website entitled ‘How Liens Work And How To Profit With Them’ It covers most every type of lien that you will encounter at a Florida County Foreclosure Auction and how you should attempt to deal with them.

      Concerning profits, I am strictly a risk and reward merchant the longer and harder the job, the more profit I want.

      On a quick grab the money and run project I will be happy to take less profit. Still, generally, I will never work for less than a 10% ROI on a six-month project, but of course, it depends very much on circumstances. In most cases, it hangs entirely on if you ‘bought right’ at the Florida County Foreclosure Auction.

      If I have to travel more than 20 miles from my ‘Home Farm Area,’ I demand on myself a higher return.

      There is always going to be that extra aggravation when you’re dealing with a project that you have to drive perhaps two or three times a week too, that involves traffic and logistics with local supplies.

      There is no fixed data available for the percentage you earn out of a deal in any given area my experience is all things are relative to a given set of circumstances, did you win the property at a great price, are the repairs of a budget that can give you an excellent return, etc. it is always on a deal by deal basis it just means you have to choose your projects carefully.

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