Last Updated on August 26, 2025
Table of contents
- How to Avoid Overpaying at Tax Deed Auction ?
- Step 1: Start with ARV (After Repair Value)
- Step 2: Apply the 65% Rule
- Step 3: Subtract Rehab Costs
- Step 4: Subtract Title and Legal Costs
- Step 5: Subtract Incidentals and Bills
- Step 6: Subtract Any Liens or Title Defects
- Tax Deed Real Life Warning
- Why This Tax Deed Formula Works ?
- Note: This Works in Every Tax Deed State
- Final Thoughts
- Tax Deed FAQ’s
How to Avoid Overpaying at Tax Deed Auction?
Buying property at a tax deed auction can change your financial future, but only if you buy at the right price. Many new investors make the same mistake: they bid too high and later struggle to sell or profit. Let’s break down the simple formula my business partner Cory shared in his video, “HOT TOPIC: Our Tax Deed Investing Formula.”
This is the exact strategy you can use to set your maximum bid, avoid losses, and make sure every property you win has profit built in.
Step 1: Start with ARV (After Repair Value)
The ARV is what the property will be worth once it’s fixed up. You can find this number by checking comparable sales in the area. Websites like Zillow, Redfin, Trulia, Property Shark, and county assessor sites are free ways to check. If you want more confidence, you can ask a local real estate agent for comps.
Example: If similar homes are selling for $100,000, that’s your ARV.
Step 2: Apply the 65% Rule
At a tax deed sale, you don’t want to pay anywhere close to full value. Cory suggests you start with 65% of ARV as your ceiling. This protects you and leaves room for profit.
Using our example:
- ARV = $100,000
- 65% of ARV = $65,000
That means, even before other costs, you should not go above $65,000 at auction.
Step 3: Subtract Rehab Costs
Every property needs some work. Sometimes it’s just paint and flooring, but other times it’s mould, roof damage, or broken plumbing. Since you often can’t inspect the inside before bidding, it’s safer to overestimate repair costs.
Example: If the house needs $20,000 in rehab, subtract that from $65,000.
- New max bid = $45,000
Step 4: Subtract Title and Legal Costs
When you buy at a tax deed auction, the title is not always clean. You’ll likely need tax title services to clear it before you can resell or refinance. This can cost around $2,000 (sometimes more).
Subtract $2,000 from $45,000.
- New max bid = $43,000
Step 5: Subtract Incidentals and Bills
Don’t forget extra costs like utility bills, unpaid water charges, or small liens. These don’t always go away in a tax deed sale. Cory recommends setting aside at least $5,000 for incidentals.
Subtract $5,000 from $43,000.
- New max bid = $38,000
Step 6: Subtract Any Liens or Title Defects
Sometimes, certain liens aren’t wiped out. If you know a property has an $8,000 lien, you must factor that in.
Subtract $8,000 from $38,000.
- Final safe max bid = $30,000
This is how you arrive at a number that makes sense. Even if things go wrong, you still have a buffer to protect your investment.
Tax Deed Real Life Warning
In this video, Cory shared a story about a property that looked beautiful on the outside but was full of mould inside. The repair estimate came back at $15,000 just for mould removal. This is why you should always overestimate repairs. If you’re wrong, you’ll be happily surprised. If you’re right, you won’t get stuck with a loss.
Why This Tax Deed Formula Works?
This formula forces you to:
- Buy at a deep discount.
- Leave profit on the table for the next buyer (flippers, landlords, or contractors).
- Protect yourself against surprise costs.
When you use this rule, your properties sell faster because other investors see profit left for them. If you bid too high, no one will want your property later.
Note: This Works in Every Tax Deed State
This formula isn’t tied to just one market. Whether you’re in Florida, California, North Carolina, Michigan, or any other tax deed state, the numbers don’t lie. ARV, repairs, title, and costs exist everywhere.
That’s why large institutional investors and banks also use similar math—they know success depends on buying low and selling smart.
Tax Deed Action Steps for You
- Write down this formula:
ARV × 65% – Rehab – Title – Bills – Liens = Max Bid.
- Research your state’s auctions:
Each state has its own schedule. Some happen once a year, others monthly.
- Practice with real auction lists:
Even if you’re not ready to bid, run numbers on actual properties.
- Overestimate repairs:
If you think it needs $10k in work, budget $20k.
- Stick to your max bid:
Walk away if it goes over. Another deal will come.
Final Thoughts
The tax deed world is full of opportunities, but only if you buy right. This formula is simple but powerful. Always start with the ARV, take 65%, and then subtract all your costs before setting your maximum bid.
It might take longer to find the right property, but patience will save you from overpaying and losing money. The best investors know that profit is made at the purchase, not at the sale.
So next time you look at a property at a tax deed auction, pull out this formula, do the math, and only bid if the numbers work.
Want to see upcoming auctions in your area? Check our Auction Calendar.
Need help running numbers on your first deal? Book a Call.
Get free tools and guides inside the Knowledge Vault.
Tax Deed FAQ’s
It’s a public auction where the county sells a property because the owner didn’t pay property taxes. The winning bidder gets a tax deed to the property.
A property becomes eligible when taxes remain unpaid for a statutory period and the tax certificate holder applies for a deed.
No. A tax deed doesn’t guarantee a clear title. You may still need legal steps, like a quiet title action, to remove liens.
Watch this video and learn about the things that you need to be aware of when you buy a property, and the specific numbers you’ll want to use!
-Dustin
PS: Need some extra motivation and/or help with your tax lien & deed Investing? Book a call with our team to get started today, finding properties from 30-90% off Market value.
