If you’re new to real estate investing, you’re probably familiar with traditional property sales and foreclosure auctions. But what you might not be familiar with yet are what are known as “adjudicated properties”.
Let’s explore the potentially quite profitable – and mutually-beneficial – topic of adjudicated properties so you can decide if they might be a good fit for you.
What are Adjudicated Properties?
An adjudicated property is a property in the possession of a municipality (such as a city) due to uncollected property taxes. They’re turned over to municipalities when the properties aren’t first able to be sold at a tax sale. And there may be more of these properties than you think – as of last year, New Orleans alone had around 1000 of them.
These adjudicated properties are then held for a certain amount of time for past owners to “redeem” them by paying the past due taxes and all associated fees. This gives the tax debtors a chance to keep their properties.
After this waiting period, the properties can be auctioned off to new buyers. If you are interested in one, you can begin the process by doing the required paperwork and paying a deposit (which you should be refunded if you’re later outbid).
This process of buying adjudicated properties can be a long one, and it can seem more complicated than other types of property sales – especially given that these properties and lots can be run-down due to long-time neglect. Is it really worthwhile to try?
Possibly! In fact, the sale of adjudicated properties isn’t just win-win for buyers and municipalities looking to get them in the hands of new tax-paying owners. These sales can also be a good thing for the communities where they’re located.
A Win for Property Buyers
For you as a potential buyer, adjudicated properties can mean deep discounts. This might make it possible to purchase a property adjoining one you already own and otherwise couldn’t afford. Or it might make it more profitable for investors looking to rehabilitate and flip the property.
A Win for Municipalities
Municipalities don’t want to manage these adjudicated properties. It takes time and money away from more pressing things, and each one represents lost local tax revenue. Selling these properties, even at deep discounts in auctions, can recover that lost revenue and bring in ongoing payments from the new owners.
A Win for Communities
When properties fall into disarray, they’re more than an eyesore. They can become safety hazards and they can decrease surrounding property values. When these long-sitting adjudicated properties are purchased by a new owner like you, and then rehabbed, it preserves and enhances the broader community.
Whether you’re more motivated by deep discounts or having your real estate investing double as “giving back” to your community, adjudicated properties are often an overlooked real estate purchasing option. With little competition in some areas, you may even find the deal of a lifetime.