11 advantages of buying a tax sale house
Ontario homebuyers have increased by double-digit percentages in recent years. These price hikes have driven buyers away and onto other means of acquiring real estate, including tax sales. Every year, tax sales are held in municipalities all over the province. For municipalities to recoup unpaid property taxes and fees, land and houses are sold for pennies on the dollar.
Here are the advantages of buying a tax sale house from a buyer’s or investor’s perspective.
It’s a fast way to home ownership
A tax sale deal closes quickly, with only a little paperwork involved. It’s the fastest real estate transaction for buying a house.
Suppose you have been saving for a down payment for a long time but have yet to purchase a home when tax sale time comes. In that case, you will buy into appealing neighbourhoods and purchase desirable homes that you may not have otherwise been able to do through traditional real estate channels.
It’s a cash transaction
A municipality typically accepts payment by several means, but no pre-approved mortgage or financing is involved. This dramatically reduces the effort required to finance a purchase like this.
Many types of properties exist
Many people go to tax sales to find cheap investment properties, affordable housing, or rentals.
Looking online at the available tax sale listings, you will find dozens of properties across the province. They vary in size and type. These listings are critical to evaluating if a property is worth investing in, what its assessed value is, and discovering how to bid.
Acquire a home at a low cost
Acquire real estate at a fraction of its assessed value at a tax sale. It’s not uncommon to pay anywhere from 50-75% of what real estate is worth or potentially less, depending on what is being sold. You ultimately determine what you’re comfortable offering but will only pay close to total value when buying a tax-sale home.
Property taxes are fully paid up
All tax-sale homes come free and clear of any mortgage attached to the property from the prior owner. This means you are not locked into someone else’s mortgage, terms, and rates.
Municipalities use tax sales to recoup property taxes. As a buyer, you pay these fees and taxes, which are included in your bid amount. This brings all property taxes up to date.
You don’t have to buy them at auction
Most tax sales are conducted by public tender in Ontario. They are typically not performed by auction, which is what many people expect when hearing of a tax sale. By public tender, you submit your bid by mail and do not have to be present on a specific day to compete with others to drive up the price in a bidding war.
Legal experts exist to help
Like real estate lawyers, there are tax sales lawyers, too. They can aid you if there are legal complexities and you must evict a tenant. Help is available to ensure a successful property transfer without significant issues.
Pre-existing owners have no claim
While you must use legal ways to evict a pre-existing owner if they refuse to leave, they do not have any right to the property if they do not redeem it within the given redemption period. This means you can move forward without worrying about them making a claim or bringing you to court.
Title searches are cheap
If there are Crown interests, liens, or other encumbrances on the property, these will come up during a title search. This is an essential form of research for any tax sale, as it will let you know if any claims are tied to the property that will transfer over to you with the sale.
You can recoup your investment quickly
Some investors buy tax sales, complete repairs, and resell the property, earning a large profit. Though this isn’t the case with every piece of real estate, many tax sale investors recoup their investment quickly.
You choose the repairs and renovations
Tax-sale homes are sold as-is. Many require repairs or updates. A former homeowner would typically do these, and you wouldn’t have a say in the choice. In a tax sale, as these repairs and renovations fall under your purview, you can decide precisely how you want the property to look and what you want it to be.