Buying A Tax Deed House

Eleanor wants to go after a tax deed house, but Dave isn't crazy about the idea.

QUESTION: Eleanor’s husband is getting his doctorate, but that will mean a big cut in pay while he does it. They have $60,000 from the sale of their house and wonder if they should buy a house for a tax deed in default. Dave doesn’t like the idea.

ANSWER: These are usually not good deals. It’s very difficult to find one. Basically what we’re saying here is the property taxes have not been paid, so the local tax assessor is selling the house for taxes. However, that doesn’t wipe out all the other mortgages on it, and most homes have a mortgage, especially when the people don’t pay taxes. If you have a paid for $200,000 house, you seldom lose that due to taxes. This is usually pitched to you on ripoff midnight TV cable deals. This is not how you find a bargain, usually.

If you can find a $60,000 house and buy it outright, that’s a good idea. Otherwise, I’d rent inexpensively and use the $60,000 to pay some of the rent during the 5 years he’s in school. Don’t go into debt, though.