Tax sales occur at least once a year in most towns and cities in Canada. Knowing what to do next can be tricky if you have the top bid for a property. You might want a tax sale house to turn into a rental, live in yourself, or fix up and resell. Your plans will guide your next steps.
As a beginner, here is what to do after winning a tax sale property.
Pay the Amount Owing
After you are declared the winning bid, you must pay the full amount owed. This includes any amount already tendered as a deposit and applicable taxes, including land transfer taxes and HST. Each municipality has its own payment rules, but payment is typically accepted in cash, a certified cheque, or money order.
If You Can’t Make the Payment
If payment is not made immediately, the municipality will not hold the property for you. Your bid has been void, and the property will be resold at the next tax sales. In many cases, the municipality will also retain the deposit you put down if there was a deposit. In addition, any resale expenses may be deducted from the deposit provided.
Register the Deed In Your Name
Before you begin work on anything related to updates or renovations or conducting a home inspection, the sale documents must be filed with your local government. This will sign over the tax sale house to you. This may take only a few hours or may take days. Either way, it’s best to wait to invest in a tax sale house until you’re sure it belongs to you.
Wait for the Redemption Period to Pass
In some jurisdictions, there is a redemption period for the previous owner. They are allowed to pay the taxes owed and regain the property. If this occurs, you are reimbursed, usually with interest. If there is one, wait for this redemption period to play out and pass. Otherwise, you may lose any money you put into the property when it reverts to another owner.
What to Do During the Redemption Period
Keep your interests limited during the redemption period. You can change the locks, get home insurance, board a broken window, or do similar small acts. You may even try to collect rent from someone already living there. If all the property is land, consider how to use it without diminishing its value.
Evict Any Current Occupants
A tax sale house may have the previous owner or tenant still living there, squatting, and refusing to leave. Don’t try to get them out yourself or illegally. Contact a real estate lawyer immediately. Pursue the legal route of an eviction and allow the police to handle any refusal to leave. It’s not kind, but it’s necessary.
Conduct a Thorough Home Inspection
When you declare the winning bid, the first step is a thorough home inspection. Get a sense of what you’re working with at your property and what needs to be addressed. Sometimes, you may have major systems – such as plumbing, electrical, structural, windows and doors, roofing, etc. – that require a fix. This should be among the first checks and fixes you do.
Secure Financing If Needed
While no lender will be willing to work with you to finance buying a tax sale home, once it’s in your possession, you may be able to secure financing for certain renovations or receive tax credits for specific modifications you make to your property. This is worth looking into as it can dramatically improve the quality of the house and add to the sort of updates you may want to do.
Fix Up the Little Things
After you’ve tackled the big issues, the next step is to deal with the small stuff. A new coat of paint. Upgraded flooring. You update the landscaping and exterior. You can add charm and appeal to your newly purchased tax-sale home in many ways—many things you can do yourself or purchase secondhand materials to cut costs.
You Can Resell Your Tax Sale House
If you complete a home inspection and there is too much you can’t afford to fix, some investors will try to resell this real estate without doing much. As a tax sale property cannot be returned or refunded by the municipality, this may be your only recourse. This is if you decide there’s not much to do with your tax-sale property.
Make Your House Uniquely Yours
When you win a tax sale and assume ownership of the home, the last step is to own it. After the essentials are out of the way, it’s time to hang art, add appliances, and redo what you don’t like in the home. Buying a tax-sale home is worthwhile as long as you have the time, budget, and creativity to redo the home according to your vision.
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