A special kind of foreclosure sale is the tax sale. This occurs when a governmental unit is not paid money it is owed and seizes the property, selling it to collect what is owed.

Many municipalities or counties conduct tax sales once or twice a year. They are generally advertised in the legal sections of the newspaper. Properties scheduled for tax sales are often removed from the list at the last possible moment. If there is a mortgage, the lender will usually pay the overdue tax and then collect it from the borrower. The lender is not going to lose its collateral because of an unpaid tax bill.

When there is no lien holder, the property owner can lose the property at the tax sale. Realizing this, property owners often pay the overdue amount at the last possible minute to avoid the sale of their property.

Fast Payment Required

It is not unusual for the tax sale to require prompt payment of your bid if you are the winning bidder. For example, the IRS requires payment in full within one hour after the winning bid has been accepted. Some tax sales require payment in full at the time the property is sold. Be prepared to pay the amount of your purchase promptly.

Redemption Periods on Tax Sales

Some municipalities allow property owners to redeem their property. This is to prevent widows or others from losing their properties for the nonpayment of a tax bill. Just as in a foreclosure sale, you could lose the investment property if a property owner uses her redemption right. You do get your money back, as well as interest, but you lose your right to the property. Ask your attorney to explain the redemption law used at tax sales in your jurisdiction.

When There Is No Mortgage

When the property is owned free and clear and the tax sale is held, you can purchase the property free and clear for the unpaid taxes. The bidding usually starts at the amount of the tax bill. If there are others interested in the property, the bidding continues between those interested in the property. Any amount paid by the successful bidder in excess of the tax bill goes to the former property owner.

Tax sales are flaunted on TV as a way to buy a property for pennies on the dollar. The reality is that it occurs rarely and not routinely.

Many government agencies stopped mailing lists or sending notifications of tax sales. The tax sale auctions are now listed only on the agency's offical Web sites.