Cancelled tax sales and how to prevent losses

A common situation is that an investor will see a property on that interests them, they obtain information about the property including the assessed value and the minimum tender amount and so they decide to invest a day of their time to visit the property in person. If the property looks promising in person, a Title Search Report is ordered to see if there are any mortgages or liens on the property that could potentially impact the sale. If not, the investor will determine the amount he wants to offer for tender, gets a certified check from their bank and sends it to the local government in question and then awaits the day of tender to find out if they will be the purchase. Then the sale gets cancelled. If this happens, the certified check will be mailed back to the investor but he won’t receive compensation for the time and money spent investigating the property including the fee for the Title Search Report and the certified check fee.

Why would a Municipality cancel a tax sale?

The most common reason for the cancellation of a tax sale is that the property owner pays the municipality the full amount of taxes owed including costs and interest and the municipality treasurer cancels the sale.

What would make a treasurer cancel a tax sale?

It used to be the case that a municipality treasurer would accept payment of taxes from the owner only until they began advertising a property for tax sale. After that, they would no longer accept payment and would continue with the tax sale. However, a few years ago the Cunningham Case changed the landscape of tax sales when Mr. Cunningham, the owner of a property subject to a tax sale, brought a municipality to court to stop the sale of his property after his payment was refused. The court ruled in favor of Mr. Cunningham and even ordered the municipality to pay $40,000 in his legal costs as well as his own. As a result of this most municipalities will now accept payment in full at any time before a tax deed is registered.

When is the cut off for tax sale cancellation?

Once a tax deed is registered a tax sale cannot be cancelled and the property is now owned by the buyer and neither the municipality nor the former owner can do anything to stop it.

How do you protect yourself?

The best way to minimize the chances of wasting time and money on a sale that gets cancelled is not to order a Title Search Report too far an advance and, if you have made the highest tender on a property, pay the full amount to the municipality as quickly as possible so there is no opportunity for the sale to be cancelled.


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