Thanks for taking the time to view our blog. If you turn on the television for very long chances are you'll hear something about the economy and the massive number of Foreclosures flooding the housing market. How does the economy and record numbers of Foreclosures affect Tax Lien and Tax Deed investing? That is an excellent question, and an important one to be asking right now. Let's look at the effects of records numbers of Foreclosures.
First of all, not every part of the country has been affected equally. Some real estate markets are merely stagnant. The parts of the country that have been affected the most now have a large number of bank owned properties on the market. With those bank owned properties comes another large group of properties that are in the process of being foreclosed on. What do homeowners do when they're facing Foreclosure? One thing they usually do is attempt to sell the home. Property owners that have equity in their home can often find a buyer that's willing to pay a discounted rate to acquire it. However, that doesn't help the rest of the homeowners that don't have enough equity to offer the property at a discounted rate. These are the homes that are destined for foreclosure.
Let's play out a scenario we happening everyday lately. You're planning to invest in a county that offers Tax Deeds and you're hoping to acquire a single family home for a fraction of what it's worth. Let's say that the county you're looking into also happens to be one of those affected most by the foreclosure market. What do people that are about to be foreclosed on do about other bills? Most of the time the mortgage is the first bill a homeowner pays. That also means that the mortgage is the last bill that goes unpaid. What about annual property taxes? Chances are many of these properties haven't had their annual property taxes paid in a long time. As you scan over the tax sale list for the upcoming Tax Deed sale you wish to attend, you notice that there are a lot of single family homes. It's not uncommon to see homes on Tax Deed lists, but usually a majority of them end up redeeming prior to the sale.
An important question to ask yourself is, "how will the saturated market affect the number of homes that redeem prior to the sale?" If the market is full of mortgage companies and desperate property owners that have their hands full with foreclosures, what are the chances that more properties than normal will go to foreclosure for the county sale? The odds say that more will fail to redeem than usual. This could equate to an additional 2, 5, 10, or 50 homes being offered at the annual sale. Desperate times also mean that there may be viewer investors in attendance.