Warning! Tax Deed Mistakes To Avoid!

Bycory August 20, 2025

Last Updated on August 20, 2025

11 Tax Deed Investing Mistakes to Avoid if You Want to Profit Big

Thinking about jumping into tax deed investing? It’s one of the best ways to get real estate for pennies on the dollar—but only if you avoid some costly rookie mistakes.

Hi, I’m Dustin Hahn, and after years of teaching and investing in tax deeds across the country, I’ve seen what works—and what can seriously mess you up. In this guide, I’ll walk you through the most common tax deed investing mistakes and how to avoid them.

What Is a Tax Deed Sale?

Let’s start with the basics. In a tax deed state, you’re bidding on actual ownership of the property—not just a lien. Opening bids often start at the back taxes owed, and the mortgage gets wiped out because tax liens take priority.

Example:
Property market value: $100,000
Unpaid mortgage: $50,000
Back taxes owed: $5,000
Winning bid: $10,000
➡️ You now own the property—mortgage-free.

Mistake #1: Ignoring Clouded Title Issues

Don’t assume the title is clean just because it’s a tax deed. Make sure the county sent proper legal notifications to everyone on the title chain. If they didn’t, the sale could be reversed—and you could be left empty-handed.

Mistake #2: Overlooking City or County Liens

While tax deed sales wipe out mortgages, they often don’t wipe out municipal liens. Watch out for:

Grass mowing liens
Trash removal
Demolition or code enforcement fines

These can add up to tens of thousands of dollars and stay attached to the property even after you buy it.

Mistake #3: Misunderstanding Redemption Periods

Some states (like Texas) have a 6-month redemption period, meaning the previous owner can still reclaim the property after you “win” it—by reimbursing you plus interest.

Mistake #4: Buying Homestead-Exempt Properties

Properties with homestead exemptions or other special protections can be tricky. Redemption rules may be different, or the sale might be reversed. Double-check the property’s exemption status before you invest.

Mistake #5: Ignoring Environmental Hazards

Steer clear of properties that were formerly:

Gas stations
Auto body shops
Dry cleaners

These could have soil contamination issues—which may cost more to clean up than the property’s worth.

Mistake #6: Missing Additional Unpaid Taxes

Winning a tax deed doesn’t always mean you’re completely current. Some properties have multiple years of unpaid taxes, and you could be on the hook for them. Always confirm the full tax history.

Mistake #7: Relying on Google Street View

Never buy a property sight unseen. Google Street View images can be years out of date. Fires, floods, or demolitions might have occurred since then. Use tools like:

TaskRabbit
Local photographers
Friends or contacts in the area

Always get updated photos before bidding.

Mistake #8: Overbidding Without an Exit Strategy

Don’t get caught up in auction hype. Know your numbers. Have a plan.

Ask yourself:

Will I flip this?
Hold it for rental?
Sell as-is?

No plan = no profit.

Mistake #9: Buying Land in the Middle of Nowhere

Just because it’s cheap doesn’t mean it’s a deal. Vacant desert lots or land with no access, no utilities, no market are common traps. Focus on properties with actual demand.

Mistake #10: Traveling for a Tiny Auction

If you’re flying out to an auction, make it count. Some investors show up with a short list of 10 properties, only to find all of them redeemed. Instead:

Travel for big auctions (like Houston, TX)
Start with a list of 100+
Expect only 15–20 properties to make it to auction day

Mistake #11: Using Third-Party Property Lists

Buying pre-made auction lists may sound easy, but they’re often outdated or incomplete. Always get your list directly from the county. It’s worth the extra step.