Last Updated on October 5, 2025
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When people hear “real estate investing,” they often think of large capital outlays and complicated deals. A Government Auction can flip that idea on its head. When property owners fail to pay their taxes, the local government can foreclose and sell the property at a tax deed sale. This public sale is a Government Auction because the county or city sells the deed to recoup unpaid taxes. In some counties, the minimum opening bid can be as low as $1,600, making it possible for everyday investors to buy a house, a commercial building or land at a fraction of its market price.
This article explains how Government Auctions work, shares a recent example from Philadelphia, and offers simple tips for evaluating and bidding on tax deed properties. Always consult local rules and professionals before investing; laws vary by state.
What Is a Government Auction?
A Government Auction is a public sale where a municipal or county government sells properties in order to recover unpaid property taxes. Here are the basics:
- Trigger for sale – A tax lien is placed on a property when the owner does not pay property taxes. After a redemption period, the government forecloses on the property and sells the tax deed at auction. Unlike a tax lien sale, the winning bidder takes ownership of the property.
- Opening bid – The starting price usually equals the unpaid taxes plus penalties and interest. Some counties offer a fixed low amount to clear backlogs of delinquent properties. For example, Philadelphia recently offered dozens of tax‑deed properties with $1,600 opening bids.
- Deposit and payment – Winning bidders typically pay a deposit of around 10 percent on auction day and must pay the balance within a set timeframe. In certain jurisdictions, the winning bidder can assign the bid to someone else before closing, creating opportunities for quick profit.
- Title issues – After the sale, the new owner may need to cure the title through a quiet title action to remove other claims. This process can take time and money, so factor it into your budget.
Government Auction Case Study
The following table summarizes two deals from a recent Government Auction in Philadelphia. Out of about 186 advertised lots with $1,600 opening bids, roughly forty actually went to sale after postponements and redemptions. Students attending the auction picked up two properties that illustrate the potential spreads available when you do your homework.
| Property (year built) | Opening bid | Winning bid | County value | Estimated market value* | Potential equity |
|---|---|---|---|---|---|
| 1137 S. Peach Street (1925, 3 beds/1 bath) | $1,600 | $51,100 | ≈$90k | $220k–$275k | $170k+ |
| Small commercial building | $1,600 | $37,600 | ≈$80k | $150k–$200k | $110k+ |
| *Estimated market value based on recent comparable sales. Potential equity equals market value minus purchase price and rehabilitation costs. |
At the Government Auction, the county still valued 1137 S. Peach Street at about $90,000, and online estimates were around $100,000. Yet comparable sales of similar 3‑bed/1‑bath houses built in the 1920s showed after‑repair values in the $220k–$275k range. Because the county values had not kept up with the market, the property was offered with a low starting bid and sold for $51,100. The buyer only needed to put down roughly $5,100 at the auction, and they can now decide whether to rehab and flip, rent it out or assign the contract for a quick profit. The commercial building shows a similar spread: a $37,600 purchase with an estimated resale value of around $150k–$200k.
Evaluating Deals at a Government Auction
Buying a property at a Government Auction is not as simple as picking the lowest bid. Proper evaluation helps ensure you pay the right price and avoid nasty surprises. Use this step‑by‑step guide as a starting point:
- Run comparable sales (“comps”)
Appraisers use the Sales Comparison Approach, which compares recent sales of similar properties in the same area. Look for three to five properties that sold within the last few months, within the same neighbourhood and with similar square footage, bedrooms, bathrooms and age.
- Adjust for differences
If a comparable has an extra bathroom, larger lot or newer construction, adjust its price down; adjust up if your property has superior features. This gives you a realistic after‑repair value.
- Don’t rely solely on online estimates
Websites such as Zillow or PropWire can lag behind the market. In the example above, online estimates of $100,000 were far below recent sales of similar homes. Always verify with local sales data.
- Do your due diligence
Check court records, water liens, demolition orders and code violations. Some properties haven’t paid taxes since the early 1990s, and unpaid demolition costs can run tens of thousands of dollars. Make sure you can obtain a clear title after purchase.
- Set a maximum bid and have an exit plan
Decide whether you will flip, rent or assign the property before you start bidding. Determine your maximum purchase price based on the after‑repair value and your desired profit. During the auction, stick to that number even if others bid more aggressively.
Benefits of Government Auctions
Participating in a Government Auction can be rewarding when you know what you’re doing. Here are some advantages:
- Low entry costs – Many counties set opening bids based on back taxes, and some keep them low to move inventory. This makes it possible to buy a property with a small deposit.
- High equity potential – When market values exceed county assessments, properties can sell for far below their true worth. The case study shows how a $51k purchase might be worth more than $220k after repairs.
- Immediate ownership – Tax‑deed auctions transfer ownership to the winning bidder, unlike tax lien sales, where investors only collect interest. You control the property right away.
- Remote bidding – Many Government Auctions are now online, allowing participants to bid from anywhere. You can send someone local to take photos and verify conditions while you analyze deals from home.
Risks and Cautions
Every Government Auction carries risks, and understanding them is part of your due diligence:
- Overbidding – Competitive bidding can push prices above your maximum bid. Be disciplined.
- Hidden costs – Properties may have structural problems, environmental contamination, or liens that are not obvious. Some states do not allow interior inspections.
- Title and legal issues – Clearing title may require a quiet title action. Some states have redemption periods, allowing the original owner to reclaim the property by paying overdue taxes and fees.
- Redemptions and cancellations – Many listed properties never reach the auction because owners pay their taxes at the last minute. Prepare multiple targets so a cancelled lot does not derail your plans.
Frequently Asked Questions
In a Government Auction, the winning bidder receives the deed and owns the property. In a tax lien sale, the investor buys the right to collect unpaid taxes plus interest, but does not own the property.
Contact your local county or city treasurer. Many publish lists of upcoming tax‑deed auctions online. You can also check specialized websites that aggregate auction dates.
Use recent comparable sales to estimate the after‑repair value. Deduct estimated repairs, title costs and profit margin to arrive at your maximum bid. If the opening bid already exceeds this number, move on to the next opportunity.
Conclusion
A Government Auction can be a doorway into real estate investing for people who lack big budgets. By learning how these auctions work, analyzing comparable sales and doing thorough due diligence, you can find properties selling far below market value. The Philadelphia examples show how a $1,600 opening bid can lead to a property worth several hundred thousand dollars. Remember, the key to success at a Government Auction is preparation: know the rules, know the market and know your limits. With discipline and research, tax‑deed sales can be a powerful path to building wealth.
