Tax Auction Houston
Real estate investors are always on the hunt for the perfect deal. Unfortunately, costs can rise unexpectedly and sometimes negate hard-earned profit. Texas tax foreclosures auctions are a unique opportunity to access large amounts of real property at lower purchase prices.
Article by Real Estate Attorney Timothy Rodman
What is a tax foreclosure auction?
Texas Tax Code §33.91 and §33.911 establish the remedy of tax foreclosure and sale for delinquent property (ad valorem) taxes for every Texas municipality and county. The foreclosure sale is conducted as an auction on the first Tuesday of the month at the county courthouse or other place designated by each county. For example, Harris County conducts their auction at the Bayou City Event Center instead of the courthouse location. Not every county conducts a sale each month so contact their tax office or appraisal district for auction information.
What is a tax sale?
Tax foreclosure sales are the first-time auctions of the properties. Generally, the minimum bids begin higher and winning bids are higher than tax foreclosure resales. Sales cover the total taxes, penalties interests and costs owed from the tax judgment.
After proper notice of sale is provided under Texas Tax Code §33.94, county authorities (generally Sheriff or Constable deputies) will conduct the auctions in accordance with Texas Tax Code §34.01. Sale of a property extinguishes mortgage and individual liens (if any) associated with the property. Tax liens and liens from government authorities are not always extinguished at sale. Professional title research is always recommended before purchase at tax sale.
Properties that are not purchased at sale are “struck off” to the county taxing unit and sold again at a later date.
What is a tax resale?
Tax foreclosure resales are not the first sale attempts at auction. These occur months or even years after the initial tax foreclosure sale. Properties sold as a tax resale generally have reduced minimum bids compared to their tax sale attempts.
Texas Tax Code §34.05 allows taxing units to auction unsold properties from tax foreclosure sales at a later auction date. According to §34.05(b), taxing units may reduce minimum bids for the properties. Once proper notice is provided per §34.05(d), taxing units may auction these properties again.
Winning bid amounts do not always cover all costs associated with a tax resale property. Ad valorem taxes not included in the judgment are incurred prior to a property being unsold at tax sale. These taxes may not be included in the bid amount for the property but are due from the buyer after purchase at auction. As with tax sales, professional title research is always recommended before purchase to ensure any remaining liens are revealed.
Do previous owners have any rights in the properties sold?
Property owners who have their property sold at tax foreclosure option have a right of redemption. Redemption periods are determined based on homestead or agricultural use of the property sold.
Tax Code 34.21
Properties designated for homestead or agricultural purposes have a 2 year right of redemption period. Texas Tax Code §34.21(a) states:
“The owner of real property sold at a tax sale to a purchaser other than a taxing unit that was used as the residence homestead of the owner or that was land designated for agricultural use when the suit or the application for the warrant was filed, or the owner of a mineral interest sold at a tax sale to a purchaser other than a taxing unit, may redeem the property on or before the second anniversary of the date on which the purchaser’s deed is filed for record by paying the purchaser the amount the purchaser bid for the property, the amount of the deed recording fee, and the amount paid by the purchaser as taxes, penalties, interest, and costs on the property, plus a redemption premium of 25 percent of the aggregate total if the property is redeemed during the first year of the redemption period or 50 percent of the aggregate total if the property is redeemed during the second year of the redemption period.”
Properties NOT designated for homestead or agricultural purposes have a 180 day right of redemption period. Texas Tax Code §34.21(e) states:
“The owner of real property sold at a tax sale other than property that was used as the residence homestead of the owner or that was land designated for agricultural use when the suit or the application for the warrant was filed, or that is a mineral interest, may redeem the property in the same manner and by paying the same amounts as prescribed by Subsection (a), (b), (c), or (d), as applicable, except that:
(1) the owner’s right of redemption may be exercised not later than the 180th day following the date on which the purchaser’s or taxing unit’s deed is filed for record; and
(2) the redemption premium payable by the owner to a purchaser other than a taxing unit may not exceed 25 percent.”
The redemption premium of 25% applies to each type of property. However, the redemption premium increases to 50% if the property was homestead or agricultural use and the redemption occurs in the 2nd year after purchase or strike-off.
How to Purchase Auction Real Estate
Texas tax foreclosure auctions can be an asset for any level real estate investor. Excellent properties can be located and purchased at these auctions. Proper research should be conducted by an attorney or title professional to disclose title issues or liens associated with these properties. Interested buyers should contact the county assessor-collector or visit their website for bidder registration.
