Tips For Buying Tax Sales Properties In Ontario

Are you looking to buy some property in Ontario? It is one of the hottest markets in the country, with prices that restrict many buyers from getting in. While this is distressing, purchasing a home below market value is possible.

Homeowners who fail to pay their property taxes become “tax delinquent,” and if this continues for three years of being in arrears, the property is listed in a tax sale to be sold. Home buyers and real estate investors bid on these properties, and it can be a huge profit potential and a way to own property in the province.

Are you interested in tax sales but not sure how to do it? Here are five tips for buying tax sales properties in Ontario.

Tip #1: Understand the Process

Tax sales sound exciting, but you need to understand its mechanics. Tax sales are listed at different times of the year and in different regions, districts, municipalities and counties. You will need to look up tax sales in the province and find where and when they are being conducted.

Tax sales follow a similar process where the properties are listed weeks or even months before the sale date, with minimal information on each. There will be an opening bid, which covers the cost of the taxes owing, and you will make your bid to purchase it.

Tax sales are conducted either by:

Public Tender

This is a written document submitted to inform a municipality of the amount you have offered to buy the property. Over 99% are done this way.

Public Auction

This is held on sales day, and you need to attend in person and have money on hand to bid.

Tip #2: Go See the Properties

Buying a cheap property sight unseen can be exciting, but this financial risk is not wise. Properties range from:

  • Residential
  • Commercial
  • Industrial
  • Waterfront
  • Vacant land
  • City dwellings
  • Country homes
  • Farmland
  • Acreage
  • Islands
  • Trailers
  • Cottages

If you are buying bare land with hopes of building a home, you don’t want to end up with a plot that can’t be built on or has certain building restrictions. The same goes for buying a house. It may be in poor condition and is uninhabitable, or you may not like the community or neighbourhood it is located in.

The bottom line is that any interested tax sale properties should be checked out firsthand.

Tip #3: Do a Title Search

Delinquent tax properties are sometimes left that way on purpose. It could be that there is an existing mortgage that is higher than the value of the property, or there could be issues like:

  • Crown interests
  • Liens
  • Executions
  • Tenants
  • Environmental contamination

It is buyer-beware, so you must do all your research. This is best done through a title search. This examines the public records to determine the legal ownership of a property and reveal its history concerning any claims made against it.

You may not want to bid on a property with these complications because they may become your problem when you take ownership.

Tip #4: Figure Out Your Bid Amount

It can be easy to bid just over the minimum amount, but that will not likely win you the property. You also don’t want to overpay and be too high above the next bid. It’s a bit like shooting in the dark with a public tender, so you need to factor in several things, including:

  • How much money do you have for property purchases
  • Whether you are bidding on multiple properties
  • How much improvements need to be made to the property
  • The potential interest in each property
  • How badly do you want it

A public auction is different; you must make real-time financial decisions to have the highest bid. Try not to let emotions take over or a sense of having to win. Set the top price you are willing to pay, and then don’t go over it.

When you win a bid, you must deposit immediately and pay the full amount, usually within a few days or weeks.

Tip #5: Have a Plan for the Property

It’s tempting to buy several tax sale properties so you can amass a bunch of land, but if you have no plan for them, they are just sitting with your money tied up. It is wise to have a strategy for what you want to achieve by purchasing this property.

There are several reasons why you are bidding, including:

  • You want to move into your own home
  • You are a house flipper
  • It is for a vacation home
  • You want to have a rental property
  • It is a business location you can use or lease out

Decide what you will do with the property and ensure you have enough funds to make it happen. That way, you won’t be stuck with some land that just costs you money.

These tips will help you when buying tax sales property in Ontario. Enjoy the process, and if you do have a successful bid, you have beaten the market and can enjoy the financial benefits.

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