I hadn’t seen Terence in some time when I ran into him over at Harris Tire and Auto while getting a flat patched up. Last time we talked, he said he was interested in buying investment property in Indianapolis and, perhaps, in a few of our surrounding communities, but I hadn’t heard how that was going. I’d offered to give him some advice to help him get started but didn’t hear back from him. I just assumed things were going well. It turns out that he was having trouble finding good deals and had just been too embarrassed to say so.

Hoping it wasn’t too late to take me up on my offer, he asked what I thought about bidding on properties at the Indianapolis Tax Sale. He desperately wanted to turn his luck around. I told him I was always happy to talk investment strategy and that an auto repair shop was as good a place as any to start this conversation.

Should You Invest in Properties Sold at the Indianapolis Tax Sale?

Indiana law requires the public auction of real estate by county treasurers on any properties with liens and fees that have been assessed due to delinquent bills. These tax sales include homes with unpaid taxes, of course, but they can also include properties with overdue sewer charges, weed-cutting fees, public nuisance fines, and even liens that have been levied due to the owner’s unpaid hospital bills. So, it’s possible that the selection of properties you’ll find at these auctions could be substantial. That’s one of the reasons why real estate investors, like Terence, are drawn to them.

The other reason Indianapolis auctions are popular is that the homes sold at tax sales tend to be fixer-uppers. If someone can’t afford to settle their property taxes, cut down the weeds in their yard, or pay hospital bills, they probably haven’t been able to upkeep on the home either. So, when looking for good investment properties to flip, a lot of investors turn to tax sales as a reliable source of leads on cheap homes. I know because I use to be one of them.

But, should you buy investment property from the Indianapolis Tax Sale? I’ll tell you what you can expect and let you decide:

• Arduous process. The first thing you’ll want to consider is the process every potential buyer has to go through in order to secure one of these properties. As a bidder in Marion County, you’re required to register for the sale online or at the Treasurer’s Office on Washington Street and supply a minimum deposit of $1,000 in the form of cash, cashier’s check, certified check, or wire transfer. If you have a business entity, you’ll also have to furnish a certificate of good standing or proof of registration from the Indiana Secretary of State. Failure to follow these basic rules results in the forfeiture of your right to bid and buy—there are no exceptions.
• Research-intensive. It’s your responsibility to research the property you’re bidding on in advance since, at the auction, the Treasurer’s Office supplies parcel numbers and minimum bid amounts only. You can find available properties advertised in both the Indianapolis Star and the Court and Commercial Record, usually on Wednesdays, and on the Treasurer’s website. Take note, however, that though the homeowner’s information and the address are publicly provided, it’s up to you to confirm the correct parcel number as that is what’s presented at the sale. You don’t want to misidentify a property’s location and bid on the wrong parcel because there are no refunds or exchanges.
• Expensive to remediate. You can assume that the properties being auctioned come with liens, late fees, and other encumbrances, but it’s up to you to determine what and how much they are. Unfortunately, the monies you pay for these properties don’t necessarily wipe the slate clean since not everything is disclosed to, or certified by, the Marion County Treasurer. So, if there are unpaid charges assessed by the Department of Public Works or demolition orders issued by the Department of Code Enforcement, for example, you could have yourself an extra set of expenses at best and a property you can’t renovate at worst. I call these misfortunate buys money pits. The folks over at the Treasurer’s Office call them “pigs in a poke.” What you don’t want is to call them is yours.
• No access. Since you can’t access the property before the auction to work in a home inspection prior to bidding, your chances of buying a house in need of costly repairs loom large. Not only that, but if you enter the premises at any time—even as the winning bidder if you haven’t yet been issued the Tax Deed—you will be charged with trespassing. The only exception the county makes is for the upkeep of the exterior of the property, which you will be expected to perform at your own expense or you’ll be hit with additional liens.
• Possession not guaranteed. There’s another potential risk you could face if you win a tax sale property in Indianapolis. Full payment is due the day of the sale, payable in the same form as your deposit, before you leave the auction. That means you can’t run out to grab more funds if you didn’t come with enough in hand. Do that and, not only can you expect to leave empty-handed, you can expect to pay an added penalty equal to 25% of your bid.

But, paying for the property in full doesn’t automatically translate to ownership either. In essence, all you’re doing is putting another lien on the property so that if the homeowner doesn’t redeem it—which they have a year to do from the date of sale—the house then becomes yours. A year is a long time to be without funds that you could use for finding another house to buy, renovate, and sell. It’s also a long time for a property to continue sitting without getting repaired. By the time you’re able to renovate it, it might be so much worse for the wear that any chance you had at seeing a good ROI could be gone. Of course, that’s assuming the property doesn’t get redeemed and becomes yours at all.

In short, the process of buying tax sale properties in Indianapolis is as long as it is tricky. There are just better ways of finding great deals that can help you realize good returns without all the red tape and risk. And, one of those ways is to approach distressed homeowners directly.

Skip the Red Tape and Buy From Distressed Homeowners

Once, years ago, I was the high bidder at the tax sale. Fortunately for the homeowner, but unfortunately for me, they were able to redeem the property. I wasn’t out that much money for the year, but it was just enough that it caused me to feel overly cautious about taking on some of the other projects I would’ve liked to. In the end, when I didn’t get to take ownership of the property, I was actually relieved. By then I had become an independently owned and operated HomeVestors® franchisee and found I preferred buying directly from distressed homeowners over auctions of any kind.

When you buy directly from a homeowner who’s struggling to meet their mortgage or other financial obligations, you have the opportunity to help them out of an “ugly” situation before it gets worse. And, thanks to HomeVestors® nationally-recognized “We Buy Ugly Houses®” advertising campaign, distressed homeowners know who to call when they’re in trouble—franchisees like me. So, I get access to great deals that hold the potential for realizing good returns, they get to get out from under a house they can no longer afford, and we both get to skip all that red tape.

If your lead-finding strategy has fallen flat, don’t turn to tax sale properties and expect a quick fix. Contact HomeVestors® instead to see how you can help homeowners and, potentially, your returns.

Each franchise office is independently owned and operated.