May 23, 2018

So You Want to Buy Property at a Tax Sale: What Should You Know?

Purchasing real property at a tax sale can be a smart investment, but before you take the plunge, there are some things you should know about the process and your rights as a purchaser. Here are six basics to keep in mind before buying property at a tax sale in the state of Indiana:

  1. Tax sales are public auctions. The time and location of the auction is included in a notice that the county auditor is responsible for publishing and posting in the county courthouse or other county building. Tax sales may be electronic, in which case the county treasurer will provide computer terminals open to the public at a designated location.
  2. Although property must be sold to the highest bidder, the Indiana Code sets a minimum sales price for each property. This minimum is generally based on the amount owed on the property for both delinquent and current taxes and special assessments, penalties, and costs relating to the tax sale and the collection of the amounts owed.
  3. If you are the highest bidder, you must immediately pay the amount of your bid to the county treasurer — but you do not immediately receive title to the property. Upon paying the bid, you receive a certificate of sale, which gives you a lien — superior to all other liens existing at the time that the certificate is issued — against the property for the amount that you paid. You receive title to the property only once the redemption period expires and the county auditor issues a tax deed. (The redemption period is the period of time, generally one year from the date of the sale, during which the owner can “save” his or her property by paying the past due taxes, costs and accrued interest.)
  4. Obtaining a tax deed is not automatic. You must file a petition for a tax deed in court within three months after the expiration of the redemption period. Also, depending on the county, you may have to give notice of the sale to the owner of record as well as any person who obtained a recorded, substantial interest in the property within six months of the date of the tax sale.
  5. Once the county auditor issues your tax deed, you have title to the property free and clear of prior liens and encumbrances. All easements, covenants and other deed restrictions shown by public records remain in effect, though.
  6. A tax deed provides a presumption that the sale of the property and proceedings were proper and that you, the tax sale purchaser, have valid title to the property. A tax deed can only be contested within 60 days of the court order directing the county auditor to issue the tax deed, and only a short list of circumstances will justify defeating the tax deed. For example, if the delinquent taxes were paid before the tax sale, or if the property sold was not subject to the taxes for which it was sold, or if the description of the property was so imperfect that it failed to describe the property with reasonable certainty, the tax deed — if appealed within the 60-day window — may be defeated.

Indiana’s tax sale statutes are very detailed, and strict compliance with their requirements is critical. This article outlines some of the basics, but if you are considering bidding on property at a tax sale, you should study the statutes and/or consult with your attorney. 

Note: This article discusses property that is occupied. Indiana’s statutes specify different procedures for vacant or abandoned properties. There also is a slightly different procedure for properties that were subject to a tax sale but did not receive the minimum sales price set by statute.

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