Looking at the possibility of purchasing property at a tax auction. Pretty scary as it doesn’t have the safety net of most real estate purchases. But I’ll probably purchase something at a tax auction this year, just so I can say I’ve done it.
So far I’ve learned a few things. It appears to me that some counties rely heavily on tax auctions to generate revenue and that county administrators take advantage of people who own vacant land in their county and reside elsewhere.
For example, we own a parcel in the boondocks of Alameda county. It’s an almost useless 20-acre parcel with access issues. The Livermore school district passed a parcel tax and now we pay more money to the Livermore schools than we pay in property tax on the parcel. There is no way to avoid the school bond assessment and this parcel will never contribute to any school use.
I have discovered hospital bonds in one county where parcel owners are charged an assessment of about $100 each year. This is an assessment for services from which out of area owners receive no benefit. Parcels I’ve checked out have little or no value. It appears that some people will purchase these lots on pure speculation for about $1,000 on the open market.
In these cases, since the land is vacant and many of the owners live outside the county, the practice of allowing a government agency to recirculate these lots at auction is at least unethical and designed to trap unwitting buyers. If it’s not illegal, it should be.
Many of the parcels similar to the one above, were created by massive subdivisions that took place during the middle of the 20th Century when speculators divided up large ranches in a real estate frenzy. This took place when subdivision laws like the California Subdivision Map Act were being implemented.
Many of the resulting parcels are useless, but unknowing people continue to purchase them speculating that a market will some day develop.
I’ve found other things going on that I’ve never seen before and so far I’ve not figured them out, but I probably will.
Title insurance is not available to buyers in tax auctions, but one can obtain helpful information from a title insurance company. Or, one can search the records at the county recorders office. Neither of these options is fool proof.
It is amazing to me that county governments are tolerating or facilitating this behavior in the modern world. Buyer be ware.