When you're purchasing a tax foreclosure property, you need to know a few things about what to expect at and after the auction. Keep in mind that many of these events are not going to happen in every state because the laws relating to tax foreclosure auctions vary throughout all fifty states. Doing your homework is, therefore, critical.

Upset Bidders

One example of issues you should know is the upset bidder clause. Because local governments want to generate as much money from the properties sold as possible, some states allow for a period after the auction is completed for another bidder to come in and outbid you. In North Carolina, for example, losing bidders have ten days to place a higher bid. However, they can't just outbid you by $1 and win the property. Their bid must be the highest plus an extra 5%. That means if your winning bid was $50,000 the upset bidder would need to bid at least $52,500.

Property Problems

Another problem that sometimes arises after a tax foreclosure sale is issues with the property. These can come in many forms. For example, one possible problem is the home has been trashed by the former owners. As a result, you might need to spend a lot of money to repair the property to livable conditions. Try to find out as much about the current conditions of the home before you start bidding and always keep back some funds for necessary repairs.

Keep in mind that the tax foreclosure process does not necessarily require those former owners to leave the property. In some cases, stubborn ex-owners have refused to abandon the property and, as the new owner, you would have to begin eviction proceedings against them. Again, you may want to keep some money aside for these types of problems.