Advanced Investing Insights

Expert Interview with Bid4Assets CEO, Jesse Loomis

Rachel Seidensticker
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Jesse Loomis is CEO of Bid4Assets, the largest online auction site for tax deed properties. The company also handles online nationwide auctions for mortgage foreclosed properties. Bid 4 Assets was launched more than 20 years ago, and since then has sold more than 100,000 tax deeds. Loomis joined Brian Seidensticker, CEO of Tax Sale Resources, for a podcast discussion regarding the numerous ways that tax deed sales are conducted, how their rules and procedures vary from one jurisdiction to the next, and common pitfalls investors should avoid. He pointed out that investors can profit from these sales and be very successful – as long as they perform due diligence and create a viable exit strategy for what to with the property once they own it.

An Overview of Tax Deed Sales 

Before a tax deed is offered for sale, at least a full year of taxpayer delinquency must occur, and the majority of the time that holding period is longer than a year. The timeline – as well as statutes and processes involved in tax sales, can vary significantly from jurisdiction to jurisdiction, between states and counties. Once tax deeds do go up for sale, there are four main avenues for investors to purchase them. They can do so through a tax deed auction, through the sale of a redeemable tax deed, via a matured tax lien foreclosure process, or through the over-the-counter sale of parcels that have reached maturity. 

The Critical Importance of Tax Deed Due Diligence 

Due diligence is an incredibly vital part of the investment process, because it helps to ensure that the tax deed being considered for purchase meets your investment criteria. It also can reveal hidden issues that could potentially undermine your financial goals by creating expensive legal liabilities and other problems, such as difficulty securing title insurance. Loomis recalls, for instance, a property in a nice neighborhood that sold at auction but turned out to be a strip of land only two feet wide. He cited examples of parcels offered at tax deed auctions that were completely flooded years ago and now exist beneath a river or a harbor. That highlights the risk of not doing due diligence, and the immense value that due diligence has for those who take advantage of it to understand exactly what they’re buying.

Title Insurance

One of the most important functions of due diligence is to determine how you will secure title insurance once you hold the deed to the property. Otherwise it can be virtually unmarketable. But the tax authority conducting the auction is not responsible for performing due diligence to guarantee you have an insurable deed. That is the sole responsibility of you, as a tax sale investor. Complicating the issue is the fact that the process to quiet a title to obtain title insurance varies drastically between jurisdictions. For example, each state or county may each have their own rules regarding which extraneous liens – such as utility liens – transfer along with the deed to the delinquent parcel. As Loomis stated, “I've actually seen people who bought houses for a few thousand dollars. But they didn’t realize that there were delinquent water bills that conveyed with the tax deed, and exceeded $20,000.” 

Know the Local Statutes

Also keep in mind that what you gain from a quiet title is also based on local rules and statutes and can differ from place to place or county to county. Loomis emphasizes that one of the biggest false assumptions investors make is saying, “I'm going to buy this property, and it comes lots of garbage on the title, but I’ll file a quiet title suit and get rid of all that stuff.” But he points out that even with a quiet title suit those liabilities may not all go away. That goes back to why the process of due diligence, and understanding the tax sale rules in the specific jurisdiction where you’re investing, is so vital. Fortunately, there are attorneys and some vendors who specialize in helping investors with the processes of doing due diligence, providing the resources that give you deeper insight into properties, and securing a quiet title and title insurance.

Craft Your Exit Strategy

Loomis also reminds investors that owning real estate only makes you money if you're somehow monetizing it – because property ownership always entails spending money. That can include routine maintenance, property taxes, insurance, and other overhead expenses. So have a plan for how you're going to monetize it before you bid on a property. Maybe you’ll make it your residence or vacation home, rehab it and flip it for a profit, or rent it out for an income stream. Buying property through tax sales is a great way to acquire property at a deep discount. But you need to have plan in place to make sure your investment will ultimately help you turn a profit in a timely and rewarding manner.

The Bottom Line

The takeaway is that just like it is with tax lien sales, tax deeds sales adhere to various state and local statutes and procedures. Being very familiar with those before you bid is one of the keys to ensuring your success.  Neither a tax deed auction site like Bid4Assets nor the county government will be responsible for what you buy and what liability or value that purchase carries with it. So read the terms of the auction, know the property and local rules, and don’t just make assumptions and leave it to guesswork. Then you can invest with confidence and have a better chance to find the diamonds in the rough that make tax deed investing such a popular and potentially lucrative pursuit. Learn more about the risks of tax deeds here.

Author - Rachel Seidensticker
Rachel Seidensticker
Chief Operations Officer
In the Tax Sale Industry Since 2010
Rachel is responsible for managing and overseeing the daily operations of Tax Sale Resources, which produces data for approximately 8,000 nationwide tax sales yearly. She started in the tax sale industry originally as an investor but decided to change course and team up with her brother (Brian Seidensticker) to build Tax Sale Resources quickly thereafter.

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