What Are Some Issues With Buying Properties That Have Back Taxes Owed?


Quick Answer

When buying property with unpaid real estate taxes, one common issue encountered by investors is the inability to see the inside of the home or get an inspection of the property before purchasing it, according to Realtor.com. The property, therefore, may not exist anymore or may require significant repairs before the investor can sell it again, which the investor may not know at the time of purchase.

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Full Answer

It may take an extended period of time, from several months to years, before the government releases the home and the investor is allowed to take possession, explains Realtor.com. It also may take a considerable amount of time before the title company issues title insurance for the property. Therefore, the cash initially invested in the home is tied up and unusable until the property is released to the investor by the government, or until the original owners pay the back taxes and regain possession. Having to bid for the home at an auction against other investors may also present an issue to some individuals buying property with unpaid taxes.

If the original owners fail to pay their back taxes in the allowed redemption period, the investor must file a lawsuit in order to take ownership of the property, states Bankrate. If the time frame in which the original owners are allowed to redeem the property spans several years, the investor must pay the taxes on the home for the following years until he can take ownership, even if he has a lien on it. If the investor fails to pay upcoming taxes on the home, another investor can pay the taxes for that year and place a second lien on the home.

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