What Happens When Renters Are Caught In A Tax Sale

Sometimes, evictions are not the residents’ fault.

Yes, you just read that right. Sometimes, residents are evicted for events entirely outside of their control. You won’t often hear a real estate investor say that because we are so often vilified by, well, everyone in the housing equation.

However, I do have to say it in order to address an issue – what happens when renters are caught in a tax sale – that you will encounter eventually if you successfully invest in tax liens and tax deeds long enough.

Take a look at this example:

At a recent tax sale in Pennsylvania, an entire family waited with bated breath to see if they would be able to buy the home they have rented for the past five years. If they didn’t win the bidding, they would have to hope the investor decided to keep them in the home. They had already been through the process three times previously, including once when the current owner, whose taxes are now in arrears, purchased the property at a tax auction. They continued to pay rent to the owner of the property regardless of its tax status.

“We love the property and love the neighborhood [but] we’re kind of worried about what happens next,” the father said in comments to a local paper.

Ultimately, the property sold for about $12,000 to yet another investor. The family hopes to convince the investor to let them purchase the property once the tax-collection or foreclosure process is completed. “My intent is to contact whoever bought it and try to buy the house,” said the father. “It’s very disappointing.”

Renters caught in tax sale did not do anything wrong

In this scenario, which really did happen last month in a small Pennsylvania town, the renters really have not done anything wrong – although I would argue that they should be investigating their rights given that the property owner has collected rent and then not necessarily (depending on the lease) held up their end of the bargain.

The bigger issue for our purposes, however, is the perspective of the new owner of the tax lien who probably has no idea that he now also must sort out the issue with the renting family who knows he paid $12,000 for the lien (they likely do not understand that does not mean he will sell the house for $12,000) and a local newspaper happily milking the story for all it is worth.

As a tax lien investor, you will encounter situations like this one where you invest in a property inhabited by people who are not responsible for the delinquent property taxes and renters are caught in a tax sale. When this happens, you must be prepared to handle the situation delicately but without forgetting this is your investment and you have to do what is right for your family as well.

At PIP Group, we have an extensive team that is constantly doing due diligence on any properties we consider bidding on at auction. We maintain multiple plans of action for every investment in order to create the best outcomes for our investors and for the properties in which we invest. You can learn more about our tax lien and tax deed investing strategies at PIPGroup.com.

About the Author

Charles Sells is the founder and CEO of The PIP Group, a turnkey service provider that focuses on investments in distressed real estate assets including tax liens, tax deeds, traditional foreclosures, fix-and-flips and long-term cash flow acquisitions. He has been involved in tax lien investing for over 20 years, during which time The PIP Group has grown to become one of the largest agencies of its kind with nearly 1,000 individual and institutional investors worldwide.

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