Last Updated on September 1, 2025
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When a Beautiful House Is a Nightmare: A Lesson in Tax‑Deed Due Diligence
We spent a long day driving around for properties. We were so focused on finding deals that we ate beef jerky in the car. No time to stop – we wanted to get a great deal at the tax sale. Our persistence paid off because we found a large brick house that looked promising. The front was clean, the price seemed fair, and the size – about 2,500 square feet – was huge for the area. From the street, you would never think twice about bidding.
Looking beyond the front door
We never bid on a tax deed property based on a drive‑by glance. We always stop, walk around and look closer. At this house, we noticed a friendly pit bull in the backyard. We took a look around the side and discovered the real story. A tree had grown through the roof and was pulling down not only the house we were inspecting but the two next to it. In Philadelphia and other older cities, neglected roofs allow vegetation to take root; over time the roots can break down the structure. When a building is in that state, it is often considered unsafe and may be ordered to be torn down.
This house was a perfect example of why tax deed properties are sold “as is.” County tax collectors warn that these properties come with no guarantees and that buyers must inspect them carefully. A nice façade can hide problems that will cost thousands to fix. We passed on this property because it would need to be demolished.
The danger of “overages” in games
While walking around, we noticed the front had new windows and a brand‑new door. It looked like someone had recently spruced up the front. The idea is to make the house look appealing so bidders offer more than the taxes owed. In some states, any amount paid above the taxes – called overages – can be claimed by the previous owner after the sale. In our example, if the taxes were $20 000 and someone bid $40 000, there would be $20 000 in overages. Unscrupulous owners might fix up the front just enough to attract higher bids. This tactic can trick inexperienced bidders into paying too much for a house that is falling apart.
Why do we always walk the property
We believe that the small amount of time spent inspecting saves us from big mistakes. Standing in the yard, we could see the tree breaking through the roof and the brick walls bowing out. No matter how nice the front looks, a tree growing through the structure means expensive repairs or demolition. According to a Santa Cruz County tax sale guide, buyers are advised to look at parcels in person and check with the zoning department to understand what they can do with the property. Simply driving by or relying on photos is not enough.
Tax deed investors must also remember that not all debts are wiped out at the sale. A county tax deed usually clears most mortgages, but some liens – such as IRS claims or special assessments – may survive. External sources recommend ordering a title search and consulting professionals to understand outstanding debts. Neglecting this step can turn a good deal into a financial trap.
How we decide whether to bid
- Title and Lien Verification
Verify the title and check for liens to avoid unknown mortgages and association fees
- Property Condition Inspection Guidelines
Inspect the property’s condition. We look for structural issues like foundation problems, water damage, trees growing through roofs or unstable walls
- Essential Steps for Land Use Compliance
Check zoning and environmental rules. Counties such as Santa Cruz recommend consulting the planning department to see if the land can be used as intended. Some properties are near wetlands or have easements that limit rebuilding.
- Understanding Redemption Periods and Property Laws
Learn about redemption periods and local laws. In some states, the original owner can reclaim the property by paying the back taxes and interest during a redemption period. This means you cannot take immediate possession, which could tie up your money for months or even years.
- Understanding True Costs in Property Purchases
Calculate true costs. Legal fees to clear the title, taxes owed, outstanding utility bills and demolition or repair costs can add up. We never assume the winning bid is the final price. Instead, we build a budget that includes repairs and carrying costs.
If you are new to evaluating properties for auction, read our step‑by‑step guide on how to pick properties for tax deed sales for more details. It explains how to use county lists, maps and site visits to build your shortlist.
A simple example
Imagine a house in a small town in the Midwest. The taxes are $10 000. The front looks clean, the windows are new, and a fresh coat of paint hides the cracked plaster. Neighbors say the house is occupied, and there’s a dog in the yard. At auction, the bidding climbs to $30 000. But when the winning bidder later inspects the property, they find a leaking roof, a tree growing through the back wall and evidence of mould. The city has already marked the house as unsafe. The buyer must either demolish the structure or pay tens of thousands to bring it up to code. Meanwhile, the previous owner claims the $20 000 overage. This scenario happens across the country, which is why it is important to look behind the paint and calculate all costs.
Other lessons for tax deed investors
Our experience with the condemned house reminded us of basic investing habits:
- Stay patient. Not every house you find will be a deal. Walk away if the costs outweigh the benefits.
- Avoid auction fever. Set a maximum bid based on your research and stick to it. It is easy to get caught up in the excitement and overpay.
- Be consistent. Successful investors develop routines for research, inspection and bidding. If you want to understand the mindset needed to succeed, read our article on the top trait you need for tax lien and deed investing.
- Seek help when needed. Work with professionals who understand tax deeds, especially when dealing with title issues or environmental concerns.
For a deeper explanation of the risks associated with tax deed investing and strategies to mitigate them, an article by CoreVest Finance explains that investors must research property details, outstanding liens and market value before bidding and warns that distressed properties often require extensive repairs. It also recommends working with attorneys and real estate professionals. County tax collectors likewise remind bidders that tax‑defaulted properties are sold as is and that buyers must conduct their own inspections.
Final thoughts and next steps
This house taught us once again that you cannot judge a property by its facade. Tax deed investing can lead to great deals, but only if you put in the time to research, inspect and calculate true costs. Don’t be fooled by new paint or a tidy yard. Always walk around the property, check for hidden damage and consult official records. And remember that some owners may play the overage game, so be cautious when a house looks “too good to be true.”
If you are serious about buying tax deeds but unsure where to start, take advantage of our free mini‑course. It explains the basics of tax liens and deeds and shows how to avoid common mistakes. You can also schedule a free call with our team. We’ll walk you through the process and help you make your first investment safely and securely. Investing in tax deeds can be rewarding, but only if you approach it with careful research and guidance.
