Last night I was looking at Dallas County Sheriff sales.
On real property (real estate), as a condition of sale, the purchaser MUST sale to original owner at 125% of purchase price on demand (1st year, 2nd year 50%, none after that).
Seems to me, a smart strategy would be to find someone who was forclosed upon (on a quality property) and offer them a bonus (say $5K) to demand to re-buy their property and immediately sell to me at the 125% price.
Example- I see Joe loses a 150K house to the sheriff's sale for $50K. I tell Joe I will give him $5K if he re-claims the house for $62.5K and immed iately sells it to me at that price. That would put me in the $150K house for $67.5K total. That's higher than the auction, but also always me to better pick and choose on a more spread out time table. Waiting for almost a full year might include lots of repairs and upgrades as well as market appreciation.
How about this?
Bringing this up so I can respond to it, I just don't have the time right now to do it justice.
Couple of thoughts:If this is legal, figure out if you can just purchase Joe's option. It would be alot cleaner to buy paper.
Secondly, at least here in IN, You don't own a tax sale property until Joe has run through all his options. Example, Mike buys Joe's house at Auction, Mike has only bought a Money investment for the first year. Joe has a complete year to continue to LIVE in the house, and pay it back at any time. Assuming that he's not foreclosed on, or something else puts him out of the house, the guys with a Mortgage that is not escrowed are the nightmare. In that case, when the Bank calls for the Loan in full, Mike has the right to pay off the loan in full, and add that figure to Joe's repayment total.
You really only want to buy at the tax sale if you are confident that there are no Liens against the property, so get familiar with the recorders office.
Tax sales can be unbelievably profitable, and they can be a total nightmare. With Joe living in the place, knowing he is going to lose it, more sabotage than you would think occurs. Joe is a slug to start who can't pay his taxes (pretty much none of this applies if you are talking about an older couple, widow, something where they love their house, have put in years living in it, and couldn't stand to see it damaged), however, Joe Six-pack, bouncing in and out of crappy jobs, a Divorce or two because they always fight about money, can destroy the home. If he is losing it, then screw everybody. Mike is just the guy making a RE transaction, but Joe Six-pack sees everyone as the enemy. Every bit of Copper in the house is pulled once he runs out of things to pawn. The furnace is pulled or destroyed, Walls are removed, with the Wiring pulled and cashed in for the copper in it. Windows broken, hot water heater pulled, everything.
Joe Six -pack is going to rail against the "man", and Mike is part of the "man"
Now, remember that my only experience is with Indiana.
Now, Mike Owns the right to the home in one year from Purchase if Joe doesn't repay. If Joe repays in the first 3 months, Mike gets 5% above what he bid. 10% in months 3-6, and 15% from 6-12 Months. After 12 months, the county gives the property to Mike.
There is absolutely a strategy to seeing a Home worth $200K that has $8K in back taxes And
has no Notes against it of any kind, and bidding $20K. If they couldn't pay $8K, they aren't going to be able to come up with $20K. No way. In a Year, they might get $8K, but not $20K. I have seen extremely valuable properties and Commercial lots go $100-200K over the minimum bid required.
About every year, My Neighbor gets $8-9K behind in Taxes on a Brick 5-plex worth over a couple hundred thousand, that I would give my eye teeth to own. Every time I have geared up to go in and bid the thing to the point I know he can't get it back, and since it is loaded with tenants, he wouldn't be able to pull off crazy damage, nor would he, it's not in his nature. I have never gotten the chance, as he always clears it in the 11th hour, but one of these years. If I every get the chance, I don't care if the top bid is $20K (It wouldn't be, just as an example), I would bid $50K. I wouldn't be bidding just to win, but to have the repay at a price that the owner can't clear it.
Anyway, that is Indiana, I can't speak to Texas, but do make sure you have your Ducks in a row, and completely understand the process. Best thing you could do if all of this is legal (and works the way you think it might, no way do I think that is the case) but just buy Joe's option on the property.