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Can the previous owner try to redeem property after a tax sale?

On Behalf of | Mar 30, 2021 | Real Estate |

There are many ways to purchase a home, and some of them are faster or more affordable than others. Buying a property at a tax sale could be a way for you to get far more real estate than you otherwise would for a certain amount.

However, with the possibility of massive financial gain also comes some significant risk. Properties that you purchase at a Texas tax sale are vulnerable to claims by the previous owner even after you make your purchase and record a deed with the county that shows you as the new owner. What are the potential risks involved with making a tax sale real estate purchase?

The previous owner could invoke their right of redemption

Property laws are important to personal financial stability, but sometimes, short-term financial circumstances put otherwise upstanding citizens in difficult positions. Losing a job or going through cancer treatment might mean not having any income for months or a few years. If someone falls behind on their property taxes and cannot pay them in full, the state could sell their property at a tax sale.

However, the original owner theoretically still has the right to redeem the property. Under Texas state law, the previous owner can reclaim the property if they pay the amount you bid as the purchaser, the deed recording fee and the back-owed taxes, penalties and interest on the property.

Additionally, they will have to pay you a 25% premium in the first year or 50% in the second year of the redemption period. The two years of redemption time start when you record your new deed to the property.

Can you avoid tax sale inconveniences?

Perhaps the easiest way to avoid financial losses and personal frustrations after a tax sale purchase is to treat the property as an investment for 24 months after you record the deed. You may want to make emergency repairs to the property and pay off any past-due utilities and taxes. However, you may not want to make major investments or remodel until the redemption period has passed and you know that the previous owner can’t reclaim the property.

Making a strong bid for the property can reduce the likelihood of a redemption, as the price that you pay increases how much they will have to pay you to redeem their home. Understanding how tax sales and the right to redemption work will make it easier for you to make informed buying decisions when it comes to real estate in Texas.



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