Hear Ye, Hear Ye! Cheap Properties to be Auctioned Off in Los Angeles!

The Los Angeles County auction for tax-defaulted properties is just around the corner.

If you’re looking for properties on the cheap, the next Los Angeles County tax-defaulted properties auction is scheduled for February 9-10. However, you need to take action NOW if you want to bid at this auction, since you must pre-register by this Friday (January 23) and pony up with a $5,000 deposit payable by cash or cashier’s check only.

California is different than most states, in that these auctions are selling the actual properties, not just a lien on the properties. Most states will just auction off the lien, which just gives you the right to earn a high rate of interest with the possibility (HA!) of redeeming the property (owning it) at some time in the future.

If you’re looking to buy a $500,000 house for $100 as you see on the TV infomercials, pinch yourself and take a reality check… it’s not gonna happen at the Los Angeles County tax auction. PERIOD. What you’ll find on auction day will be mostly vacant land, some with value, some not. And some properties will have other issues that you may not want to take ownership of, such as liens, toxic waste and other nasties.

Be prepared to encounter a sea of “suits” at the auction… institutional investors in Men in Black-style garb looking to pick up a ton of properties, carrying large database printouts and blessed with rather large pocketbooks. Don’t try to cozy up to them to get any info or insight as to what they’ll be bidding on – they’ll just glare at you through dark-colored glasses and beam you off to the next planet.

Property tax auctions are not for the lazy or the sqeamish. You’ll need to get your feet wet and do some research before you buy, and there are a megaton of properties listed on the intial property list. The majority of these properties will likely be redeemed before the auction date, and some redemptions may be reported as late as the day of the auction, so be prepared to have several backup plans if the property you want is no longer for sale.

Here’s an example of tax auction buyers who bought a “dog” at an auction and then immediately unloaded it to another unwary buyer:

A property was photographed as a light-yellow single-story building with several doors in a row, similar to a motel complex (perhaps it was at one point). This property was part of an online tax auction held in California (not Los Angeles County, but close). There were nice big trees out front, some parking… looked like a good deal on the surface.

The property got bid up and up eBay-style, until someone was finally declared the winner. Ta-da! Victory Dance and all that… until… they found out that the picture was taken carefully so it would not show that the building had been completely gutted. Not wanting to handle this mess, the buyer put the property back on the auction block (and on the same auction website) for the next sucker buyer to bid on, and successfully dumped the property on someone else. I think he took a bit of a bath on the deal, but not as big as he would have if he would have held on to the property.

Lesson Learned: Property data included in the tax auction lists, whether it includes pictures or not, cannot by relied on to be 100% accurate. Listings with pictures sometimes have a photo of a different (prettier) property. Properties that are supposed to include structures often do not… either the structure was burned down or otherwise removed. Properties that have an address listed often have the wrong address. The APN number (parcel number) rules in this case, and what you buy is the property attached to that number.

Still reading? Here’s how to participate in the Los Angeles County Tax Auction:

• REGISTER: You must register and pay your $5,000 deposit (cash or cashier’s check) in person by this Friday, January 23. If you do not use the entire $5,000 deposit at the auction, you’ll receive a refund within a month or so of the auction date.
• GET THE AUCTION LIST: Buy the auction list for about $30 (plus postage if you have it mailed). You can buy it online, by phone, or in person (see the form for info). OR, you can pay for a subscription to PropertyShark and get the list that way, which will also include any research that they have done. You can either sign up for PropertyShark online, or you can call them at 213.455.9915 (no, I don’t get paid anything for this).
• UNDERSTAND THE AUCTION RULES: Print out the auction rules and read them at least twice. They contain important information that you’ll need to know before the auction date.
• RESEARCH: You can either buy the auction list and do most of the research on your own, or you can can use PropertyShark to cut down on the legwork. Either way, DO NOT BID ON PROPERTIES YOU HAVE NOT VIEWED WITH YOUR OWN EYES (or by someone you trust). Don’t forget to check for liens, toxic waste declarations, and other nasties that you don’t want to take ownership of. The online tax auction list and PropertyShark will do some of this for you, but you may also want to check with the County Recorder’s Office.
• CHECK FOR UPDATES: The initial auction list will be pared down substantially by the date of the auction, either by people paying off the delinquent taxes or by the County correcting errors. Updates will be available online at the Los Angeles County Tax Collector’s website, or via PropertyShark.
• BID: This is a live auction, and you must be present to bid. If you are not present and have not indicated a designated representative on your bidder registration form, then you’re out of luck this time around.
• PAY: If you are successful in bidding on a property, you will need to provide payment IMMEDIATELY. There will be a payment desk set up in the auction room. For purchases up to $5,000, payment in full is required (your auction deposit may be used for this). For purchases of $5,001 to $50,000 you’ll need to pay a $5,000 deposit. For purchases $50,001 and higher, a 10% deposit is required. These limits are PER ITEM. If you are required to pay a deposit only at the time of the auction, then the balance of your purchase price is payable within 30 days. Payment may ONLY be in the form of cash, cashier’s checks or bank-issued money orders payable to the Los Angeles County Tax Collector. 
• WAIT: Your successful purchase will recorded in your name within a month or so after the auction date. HOWEVER, read and understand this warning from the Tax Collector before making any improvements to the property: There is a one (1) year period of time, after the date the tax deed is executed that a proceeding based on alleged invalidity or irregularity can be commenced, pursuant to Section 3725 of the California Revenue and Taxation Code. Think this won’t happen to you? Think again… I’ve seen it happen, and I have the paperwork to prove it.

If you’re attending the Los Angeles County Tax Auction next month, good luck and happy bidding! If you’d rather purchase a home to live in or investment properties that are easier to turn over, i.e. properties that have houses on them and will sell for a profit in this lifetime, then contact me and let’s talk. Here’s my info: Linda Slocum, Santa Clarita Realtor, Linda@SantaClaritaRealEstateBlog.com, 661.670.0349.