California is a tax deed state and not a tax lien state. When a homeowner falls delinquent on property taxes, the county will foreclose on the property and sell it at auction for the back amounts owed. At auction, you're bidding on the actual deed to the property, not the right to collect the back taxes.
TL;DR (Too Long; Didn't Read)
Research tax auctions in California on the county assessor's website. Properties go to the highest bidder at the auction sale.
Buying Tax Liens in California
There are two kinds of tax-defaulted property auctions: a tax lien auction and a tax deed auction. Buying a lien gives you the right to collect the past-due taxes plus interest at a specified interest rate. The homeowner keeps the property deed unless the debt remains unpaid, in which case you can foreclose. You won't find any tax lien sales in California, however, since California is a tax deed state. After the property taxes go unpaid for five years, the county will foreclose and auction off the property to the highest bidder. If you place the winning bid, you've bought the actual property and not simply the right to collect the debt.
Where to Find Tax Sale Information
Each county treasurer's department schedules and holds its own auctions for tax-defaulted properties within the county. Most have websites, and you can find information on upcoming tax sales there. The county treasurer must also publish a list of the auction properties at least three times in a local newspaper. This process usually starts around three weeks before the auction date. Be aware that the homeowner has the right to pay off the back taxes and save the property from a tax sale until 5 p.m. on the last business day before the tax sale. So, if a property does not appear at the auction sale, it likely has been redeemed.
How to Buy Tax Deeds in California
The most important point is – do your homework before you arrive at the auction sale. Tax-defaulted properties are sold as-is. This means you have no comeback if the property is in poor condition or does not conform to building code or zoning ordinances. Contact the local zoning department to confirm the property is zoned for residential, commercial or industrial use; then, inquire at the county recorder's office. Some counties and cities have a public database you can search online or you can visit in person. All you need is the property's address to find out if there are liens recorded against the property.
On the Day of the Sale
Attend the auction sale in person. You can't mail or telephone in your bid – it's a requirement that you verbally bid in person. Some counties require that you register in advance and pay a refundable deposit of approximately $5,000 before you're permitted to submit a bid. Upon payment, you'll be issued with a bid card for identification during bidding. Be aware that each property has a minimum bid based on the past-due taxes, interest and fees owed on that property. You can't bid below the minimum. Payment is due in full as soon as you place the winning bid by cash or cashier's check made out to the county. Personal checks are not accepted, so you must have adequate funds with you the day of the auction.
Beware the Homeowner's Right of Challenge
You can take possession of the property as soon as the sale has been recorded, which is usually within a few days of the tax sale auction. By California tax lien laws, there's no redemption period for delinquent payers – that period ended the day prior to the auction at 5 p.m. However, the homeowner does have the right to challenge the validity of the tax sale within one year of the auction date. You don't technically have clear title until the year is over, so hold off on any sale or improvement plans until then.
- California State Controller: County Tax Sales Information for Bidders
- Orange County Treasurer and Tax Controller: Property Tax Sale Auction
- San Diego County Recorder: Official Records Search
- Legal Beagle: Why Are Foreclosure Auctions Postponed at the Last Minute?
- Legal Beagle: Alternatives to Foreclosure: 5 Ways to Legally Avoid Foreclosure in California
- Legal Beagle: Where Can I Get Help Paying My Property Taxes So I Do Not Lose My Home?
- Legal Beagle: How to Find Property Taxes By Address
- Legal Beagle: Auction Vs. Foreclosure
- Legal Beagle: What Are the Different Types of Property Deeds?
Jayne Thompson earned an LL.B. in Law and Business Administration from the University of Birmingham and an LL.M. in International Law from the University of East London. She practiced in various “Big Law” firms before launching a career as a commercial writer. Her work has appeared on numerous legal blogs including Quittance, Upcounsel and Medical Negligence Experts.