I’m from Memphis, which almost automatically means I love music. I get asked a lot if I prefer Stax Records to Motown, and the answer is always yes. I mean, the actual answer is “both are so great, come on,” but when push comes to shove, I prefer Stax. I just like the pace of it a little bit more. But, that’s not because of a bias toward Memphis. For proof, look at the Memphis tax sale.

What does the Memphis tax sale have to do with blisteringly great, sultry soul music? Absolutely nothing. And that’s the point: when thinking about my investments, I don’t want to be thinking about red tape or other irritations. I don’t want a system where I can’t improvise.

That’s the problem with tax sales, and why I encourage other real estate investors to think about other ways to generate leads. While the Memphis tax sale can work for getting a hold of an investment property, it can also cost you time and money. You will probably end up with more frustration than cash.

So, as you can see, I’m not biased toward everything just because it is Memphis. I love this city and want to make smart real estate investments to make it even better.

Is the Memphis Tax Sale Worth the Investment Risk?

Risks of the Memphis Tax Sale

To start with, even though I’m talking about the Memphis tax sale, it is run through Shelby County. This means there are properties from outside of Memphis as well. You’ll find properties from Germantown, Southhaven, Lakeland, and all the suburbs, cities, and towns radiating out from the Mississippi. But, that also means a lot more rules. Let’s look at how some of these rules might create issues for you with the Memphis tax sale.

A Rigid Schedule

If you’re like I was, you are addicted to the tax sale schedule. Right now, as I write this, there is one scheduled for about two months from now, one about four months from now, and one about seven months from now. That’s good to know for planning purposes, but not great for actual buying purposes.

It makes sense why it is done this way. They can’t just sell houses every time there is a foreclosure; no other business would get done in the city. There’s such a large volume, they can only have the sales at specific times. That’s not bad for some larger investment firms, but it can make things challenging for mom-and-pop investors, who often rely on a steady stream of projects and can’t always afford to wait a few months to get something going.

A Lot of Competition

The schedule of sales would be beneficial to large banks and investment firms who want to buy in bulk. But, there is another small, subtle tool they have in their belt that can give them a slight edge: literally all the money.

OK, maybe not literally, but compared to people like me and you, their resources might as well be endless. They can hoover up the best properties without breaking a sweat, which means you might have waited all that time for the auction and come up with nothing. Maybe that is ok if the Memphis tax sale is just part of your strategy, but if you have been holding out on other opportunities while waiting for the sale, you’re in a lot of trouble.

It’s not just the banks, either. Every other real estate investor is looking at the schedule and circling it, too. So, you’ve already got a lot of people bidding. That leads to some other problems.

The Risk of Overpaying

The Shelby County tax sale has a minimum bid. This minimum bid is going to have the estimated costs of the house, of course, but also overdue city and county taxes, interest charges, court and attorney fees, as well as service and title costs. So, already, the property might not be as cheap as you would hope.

And, that’s just the start. Here’s the thing about auctions: people are bidding. Remember, for some people, they only have four times a year. So, temperatures rise, competition kicks in, and you start to think of your bid as a sunk cost. If you’ve gone to X, why not X+1, or plus another couple thousand.

Look, it’s exciting. But the excitement is, in and of itself, a danger. You can very easily join the frenzy, whether you’re going against an eager mom-and-pop shop or a large group with bottomless pockets.

The Risk of Choice Paralysis

At the last Shelby County sale, there were 65 properties sold, while about 50 went unsold. That’s over 100 houses. How do you know the right one?

You’re given minimal information and trying to find out more can stretch your resources, both in time and money. But, without doing some rigorous due diligence, you might end up with a house whose repair costs eat into your potential profit or one that is so ridden with liens that you are caught up in the red before you’ve even begun the rehab. It’s a risk you don’t need.

The Risk of Redemption

Here’s the thing about a tax sale: when you buy the house, you don’t own it yet. The owner has a specified time period to regain their house. Here are the laws in Shelby County.

Properties purchased in a tax sale may be redeemed by the previous owner, the heirs of the previous owner, or lien holders and assignees. An order confirming the tax sale is entered into the court records within 45 business days of the sale date. Once the order is complete, the property is eligible for redemption. If the IRS holds a lien on the property, the right of redemption is 120 days from the date of the sale (28 U.S.C. §2410(b)).

That’s right: you don’t own the house for up to four months. That means you either start repairing it right away and risk losing it, or sit on it for months, paying taxes and eating into your liquidity.

Look, I support the Right of Redemption for homeowners. But, the whole thing is a problem from an investors’ point of view. It’s red tape that I just don’t need.

Avoid Red Tape by Getting Better Leads

I hate red tape. I hate when houses get caught up in bureaucracy. And, once they are foreclosed upon, they enter the land of red tape, where your time and money go to die.

So I want to get my houses before they foreclose.

I have been able to do that since I became an independently owned and operated HomeVestors® franchisee. You know us—we are the “We Buy Ugly Houses®” people. Since 1996, homeowners facing foreclosure—or needing to sell their house fast for any reason—have turned to HomeVestors® franchisees like me for a quick, fair sale. It’s a much better way to get qualified leads.

Qualified leads are one of the best benefits, but having to choose the most important thing about being a HomeVestors® franchisee is like having to choose between Motown and Stax. But for me, the qualified leads are Stax: they’re what makes everything better.

If you’re interested in getting qualified leads to achieve your investing goals, request information today. You’ll be humming a happier tune.

Each franchise office is independently owned and operated.


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