Common Joe 'n Jane Real Estate Wiki

Real estate exam prep made easy! Dive into our wiki for key concepts and study materials tailored for success in your exams.

<--Back to Wiki Home
Bite sized definition logo.

Define Tax Sale in Real Estate

Tax Sale: 

A tax sale is a public auction where properties are sold because their owners didn't pay their property taxes. Local governments hold these sales to recover the unpaid taxes and use the money to fund important community services, like schools, roads, and emergency services.


For example, let's say Mr. Johnson owns a house, but he hasn't been paying his property taxes for a few years. The local government decides to sell his house at a tax sale to collect the overdue taxes. Interested buyers attend the auction, and the highest bidder gets the property. The money from the sale is then used to pay the outstanding taxes and any associated fees.

Illustration of a diver exploring the depths of the ocean. This image represents in-depth further learning in various real estate dictionary and glossary terms on our website.
"A Deep Dive for Real Estate Agents"

Here are a few more points about tax sales that might be helpful for your real estate agent exam:

Types of tax sales: There are typically two types of tax sales – tax lien sales and tax deed sales. In a tax lien sale, the winning bidder purchases the right to collect the overdue taxes, plus interest and penalties, from the property owner. In a tax deed sale, the winning bidder purchases the property itself, subject to the right of redemption, if applicable.

Due diligence: Before participating in a tax sale, it's essential to do your homework on the properties you're interested in. Researching the property's condition, potential liens or encumbrances, and any environmental or zoning issues can help you make informed decisions during the auction.

Redemption period: In some jurisdictions, the original property owner has a certain amount of time, called a "redemption period," to pay their overdue taxes, interest, and penalties to reclaim ownership of the property, even after it has been sold at a tax sale. The redemption period varies depending on local laws, so it's essential to understand the specific rules in your area.

Clearing title: After purchasing a property through a tax sale, you may need to take additional steps to obtain a clear title. This might involve going through a "quiet title" action, which is a legal process that removes any lingering doubts or claims on the property's title. Having a clear title is crucial when selling or refinancing the property in the future.

Competition and investment risks: Tax sales can be competitive, and it's essential to set a budget and stick to it during the auction process. Keep in mind that investing in tax sale properties carries certain risks, such as property condition issues or unforeseen complications with the title.

Remember that tax sale rules and regulations can vary by jurisdiction, so always familiarize yourself with local laws and practices when working in the real estate field.
Illustration of Dumb Ox mascot.

"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"

In a town where the sun shines and trees gently sway,
A tax sale occurred on a bright, sunny day.
For properties with taxes that remained unpaid,
Their fate was decided, in a tax sale displayed.

A house on a hill, with a view oh-so-fine,
Was part of the auction, and up for the line.
The bidders, they gathered, to make their best try,
To win the house where the overdue taxes lie.

The highest bid won, and the home found a friend,
With taxes recovered, the story did end.

Invest in Your Future.

Buy Access Now!