One of the most vital keys to your tax sale success is to understand fully the nature and description of what is meant by real property. You must obtain a comprehensive understanding of real property so that you are certain you understand exactly what you are purchasing or investing in at the tax sale.
When you make a purchase of a piece of property, you are buying more than just a piece of land The purchase of real property may include the fixtures, improvements, and land as well as specific rights as to the uses of aspects of the land. The items included with the purchase or real property are referred to as the bundle of rights and you must understand what portion of this bundle is being offered to you before you can determine the value of the investment.
In order to make prudent decisions pertaining to a tax sale purchase, you must determine exactly what portion of the full bundle of rights is being offered to you at the sale.
- You must gain a comprehensive understanding of what is meant by real property.
- You should cultivate the ability to review deeds and other records to determine what inclusions or limitations might effect your investment.
- You must gain an understanding of the coding used by a particular taxing authority that indicates what rights are being transferred…. When you have gained all of this base knowledge incorporated into this course, you will be able to feel secure that you are purchasing the exact interest in the real property available at the sale that you expect.
Example: At a recent sale we attended, an individual who did not fully understand the nature of real property did not conduct and adequate inquiry into the tax sale investment they were making.
- He bid on multiple ‘parcels’ available at the auction.
- The total cost of these ‘parcels’ was nearly $10,000.
- Unfortunately, the investor did not realize he was buying only the mineral rights to these acres of land.
The investor thought he was investing in the land itself…..If the investor had made an adequate search into the public records, it would have been obvious that the mineral rights to the property had been transferred by contract. He could then have compared the mineral right contract holder’s name to the name on the tax sale listing forms.
The owner of record whose interest was abolished by the sale was the owner of record for only the mineral rights to this land.
This is an example of only one of the disappointing and expensive mistakes that can be avoided if a solid knowledge of real estate fundamentals is gained before implementing a tax sale, investments strategy.
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