Gary Giffin's Blog Blog Real Estate News Events San Diego,CA




If a taxpayer is delinquent on their property taxes, the government (local, county, city, or state) demands the back tax payments from the owner and penalties.


If these payments still aren’t made or satisfied, those delinquent payments (now called tax liens or tax deeds) are sold at auction to the highest bidder plus penalties.


These taxes collected are usually the only way a government can pay for water and sewer systems, road construction and maintenance, public schools, police and fire department and almost every other agency or facility that needs service for the public.  These government agencies want the money owed them and any penalties and interest.


It is not uncommon for property valued at $50,000 to 1,000,000 or more to be sold at these tax auctions for only a fraction of their value—from a few hundred dollars to $15,000 to $30,000. Actually the state of California property taxes are 1.1% of the assessed value, or 6.6% over a 5 year +1 year redemption period.


Your rate of return is fixed by law, and guaranteed to stay high regardless of what happens to bank interest rates or the stock market.


Every state is different. There are over 5,000 taxing entities in the United Sates. Most are counties but some are regional, city and others.  One is Washington D.C. The rates, delinquent period, redemption period are all different. California has the longest delinquent period, 5 years, plus 1-year redemption period.  The shortest is Texas at 6 months. Most states are 1 to 3 years. The interest rate also varies form 16% to 24%. A few are even higher. It is very important to know the laws and rules in every place you plan to bid. Pick up the phone and talk to the county person who will be holding the sale auction. They are very knowledgeable and helpful. Be sure to send in your application or you won’t be able to bid. Also, it is important to look at the properties on which you plan to bid.  If you have any questions get a property profile from a local title company. They are usually free.


Most property owners do pay their back taxes. In fact, 95% of the properties are redeemed. The rest go from a tax lien to a tax deed. Once the redemption period expires then you can go to the county, receive the tax deed, record it, and you own the property. All mortgages and other non-governmental liens are also removed. Free and clear.


Some states like Texas, Georgia, Rhode Island, Delaware, and Illinois, if the lien or deed gets redeemed early, annual returns of 100% are possible. The government does control the tax auction process. They hold the auction. They send out all the paperwork regarding any change of status. They send you a notice when the redemption period will expire. They are very helpful to you.


Most counties have only one auction per year. Use everything you can to  estimate the market value of the property. If you are looking at several properties, you will need to get your list down to a few properties before the tax deed sale occurs.  You will not have time to do detailed research on more than a few properties, and you will need to focus on the best prospects.


Do not get caught up in a bidding war. Sometimes the bidding can exceed the market value. To avoid possible environmental issue, do not buy property near industrial areas. Avoid any areas that were previously used as commercial or industrial areas. Gas stations almost always contain underground storage tanks that can lead, potentially contaminating nearby properties. Avoid dry cleaning facilities, also lead paint buildings. In the case of environmental contamination you could get stuck with thousands, if not millions of dollars of liability.


The rest is up to you. Do all the research you can do on the tax liens or tax deeds that you can afford.  Go to the auction to see how they work. Keep asking questions—then after all is said and done—there is usually more said than done. Buy at least 1 to 3 or 4 tax liens for minimum money. See how they system works. Good luck!

Gary Giffin, Middleton & Associates Real Estate. If you’d like to learn more about Gary or What your San Diego Home is worth, visit his website, or San Diego Coastal Real Estate at , email him,, or call him for an appointment at 858-401-0204


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