Essential Due Diligence Before Bidding at Tax Resale

Purchasing tax resale properties in Oklahoma can be a lucrative opportunity for savvy real estate investors. The county has the authority to auction these properties to the public after three years of unpaid property taxes. The bidding often starts at the exact amount of unpaid taxes, so properties can be obtained at significantly discounted prices to the current market value.

However, the potential upside of tax resale properties comes with risk. Tax resale purchases in Oklahoma are “buyer beware” sales, with no guarantees of clear title, marketability, or property condition. That’s why thorough research and due diligence are absolutely critical before placing a bid.

Here are some of the most important types of research a property investor should conduct before bidding on a tax resale property in Oklahoma:

Oklahoma Property Tax Sale Framework

Investors should read tax resale statutes and consider the following:

1. Tax resale purchases do not come with warranty deeds. The county treasurer conveys only the interest it acquired due to tax delinquency, and usually offers a county treasurer’s deed or county sheriff’s deed. This title is NOT marketable and must be “cured” after the auction.
2. The sale does not extinguish all liens or encumbrances. Federal tax liens, city/municipal liens, mortgages, and some judgments will remain as valid claims against the property being sold; the winning bidder at the auction will inherit the liability for these claims.
3. There is no right of redemption after the resale auction for the owners who are divested of ownership at the sale, unlike tax lien certificate sales in other states. Many states have a 90-day or one year waiting period for new owners after a sale; Oklahoma does not have this.

Verify the Property Condition, Structures, Tenancy

The list of properties up for auction may include vacant lots, dilapidated structures, landlocked parcels, floodplain land, tracts that cannot be developed, etc. In order to avoid post-auction headaches and significant legal costs, investors should:

• Conduct Physical Inspections: visit the site if possible to confirm that the property exists and assess the physical condition, legal access, quality of surroundings, etc.
• Check GIS Maps and Aerial Imagery: use county and third-party mapping tools to check the location, shape, topography, etc.
• Ensure Zoning and Land Use: while online details are helpful, it’s best to contact the local planning department and confirm the zoning and use restrictions, as well as any current or upcoming planned developments nearby.
• Evaluate Utility Locations: determine whether the property has access to water, sewer, electric, and other essential services.

Confirm Ownership and Chain of Title

The county will convey whatever interest it holds, but it is essential to be fully informed of a property’s title issues before bidding. You should:

• Search the county land records: look for the last warranty deed, any recorded mortgages, liens, easements, and prior tax sales.
• Run a title search or order a preliminary title report: this helps reveal encumbrances which might survive the tax resale (such as IRS liens).
• Check for probate-related issues: if the owner being divested is deceased, some complications could arise if there are unresolved estate matters. Note: the majority of properties sold at tax resale in Oklahoma are being auctioned because the owner passed, and family did not know there were property taxes due.
• Confirm total tax delinquency: ensure the amount due is accurate and no other sums will be assessed
• Check for special assessments and unpaid HOA dues: homeowners association dues may not be extinguished by the sale and could become the buyer’s responsibility
• Look into municipal liens: city code violations often result in city liens, which could arise from unpaid utility bills, mowing and maintenance charges, etc.

Analyze Market Value and Resale Potential

Even if a property is acquired at auction for below market value, it must have some viable resale or use value for the investor. Most of our clients look for the following details before bidding:

• Comparables (Comps): use recent sales of similar properties in the surrounding area to estimate potential market value
• Consult real estate agents or appraisers: these professionals can help assess demand for the property type
• Know the holding costs: factor in the future property taxes, insurance, maintenance, rehab, and legal costs associated with curing title and clearing liens

Know the Bidding Process and Plan for What-Ifs

Each county in Oklahoma conducts its own tax resale auction, usually starting on the second Monday in June. All counties have their own procedural rules, but here are the most common crucial details to know:

• Get the auction list early: Most counties publish the list of eligible properties thirty days before the sale; check the county treasurer’s website or office. For example, the Oklahoma County Treasurer’s Office posts their list here each year.
• Register for the auction: Each county will offer registration for bidders prior to the first day of auction; they may require identification, mailing addresses, bid deposits, etc.
• Beware some properties will be removed from the list: Property owners may cover delinquent property taxes at any time prior to the commencement of the auction for their specific parcel; it is a common occurrence for properties to be removed from the sale list the morning of the auction.
• Plan for a quiet title action: The title being offered to the winning bidder is not marketable. Investors should be prepared to work with a skilled real estate attorney to complete a tax sale quiet title action after receiving the deed from the county.
• Be prepared for evictions and occupancy issues: The auctioned properties are being offered for tax purposes, not for occupancy issues. If the property is inhabited, investors should know whether they will have to conduct an eviction or use other strategies to remove the current habitants or tenants.
• Clear legal hurdles before investing in rehabilitation: Because the county is not offering marketable title to the property, the winning bidder should ensure that they have completed a quiet title action and confirmed their marketable title ownership before spending funds to improve a property.
• Ensure permitting: Many tax sale investors plan to hold, stabilize, and rent their auction properties to tenants; these properties often require a municipal certificate of occupancy before a tenant can take control of the premises.

Work with Oklahoma’s Best Property Tax Sale Attorneys

Tax resale properties can be a unique entry point into real estate investment and provide tremendous opportunity for investors. However, they can present multiple challenges even for experienced bidders. Have a knowledgeable and skilled team of Oklahoma real estate attorneys on your side.

The attorneys at Avenue Legal Group offer services for pre-sale due diligence, quiet title actions, investor troubleshooting, lien releases, and general counsel services for all real estate investors and professionals.

Contact us today to schedule a call or consultation to make sure you are protected legally in your next investment. Or, submit your property information here to obtain a no-obligation flat fee quite for an Oklahoma quiet title.