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Sheriff Land Tax Sale

A sheriff’s land tax sale usually happens when the owner of the property has not paid the property taxes for the property, although there could be other reasons for the sale. Sheriff land sales in Ontario usually take a few years before the case actually makes it’s way to the final sale proceeding and a number of municipalities put a minimum bid price on some properties to avoid a fire sale price.

In most cases we advise clients to try and stop a sheriff land sale since the home owner could lose all their equity in the house. Please go to our home page for more information regarding power of sales and sheriff land sales.

Tough economic times will force many Ontarians to face the harsh reality of having their home subject to a tax sale.

In May of 2020, the Bank of Canada announced that it expected mortgage arrears rates to climb to 48% in Q1. As homeowners continue to try and keep up with payments during the financial impact of COVID-19, it is expected the number of Power of Sales or Foreclosures will also continue to rise. If a homeowner is unable to pay their taxes, then they will be subject to a Tax Sale.

Power of Sale VS Tax Sale

A Power of Sale happens when the homeowner fails to make their mortgage payments. In Ontario, a lender can start the power of sale process by sending a Notice of Sale which gives the borrowers a 35-day’s notice to send  payment. A Tax Sale happens when the homeowner has missed their tax payments for up to three years. The municipality attempts to recover unpaid property taxes through the forced sale of the home.

A tax sale supersedes any existing mortgages on the property except those in favour of the “Crown” such as the government of Ontario or the government of Canada.

The home is then put up for public auction or public tender where people can bid on the home through a minimum tender amount that must cover the outstanding taxes, penalties, interest, and municipality costs. A public tender is the most common form of tax sale in Ontario.

Public Auction VS Public Tender

A public auction is similar to a traditional auction where you are allowed to be present at the sale. It also allows you the opportunity to continue bidding on the property if you are outbid by someone else. The person who bids the highest amount will ultimately get the property.

A public tender is a closed process where the potential buyer must put a bid on the property using a sealed envelope. A bank draft or certified cheque for 20% of the final offer is also required. A bid at the amount currently owed on the property does not determine whether or not you can purchase the property. Instead the highest bid overall will determine who can make the purchase.

How Do I Stop A Tax Sale?

Most lenders will advise homeowners to try and stop a tax sale. This can be done in several ways. The most important thing to do is to show you are making an effort to pay the taxes.

Take steps to secure additional money through:

Purchasing A Tax Sale Property

  • Getting a second mortgage
  • Sell the property and use the proceeds to pay down debts
  • Redeem the property by paying the deed holder the auction price plus interest and costs.

For new home buyers, a tax sale can be a great way to enter the property ladder. Homes sold through tax sales often sell below what you would pay in a traditional real estate environment. It is also a great way to begin investment home buying, allowing a buyer to purchase multiple properties at a great price.

Many buyers use those as an opportunity to get into the ‘house flipping’ business, buying homes at a low price and fixing them up to sell in the future at a profit. Though they may seem like a steal, it is important to proceed with caution. Tax sales can still be subject to costs and fees after the deed has been transferred.

There are several things to take into consideration before you attempt to buy a home through a tax sale. It is important to do your due diligence to avoid making a purchase you will regret later.

  • Inspect the property – As a potential buyer, you have the right to inspect the home or property before the sale. However, it is important to note that you are purchasing the property ‘as is’ and no repairs or adjustments will be made before the sale.
  • Legal obligations – If you purchase a property through a tax sale, you will be responsible for any outstanding debts owed on the property.
  • Environmental cleanup – If you purchase a property on contaminated land, you will be responsible for any environmental cleanup or other legal obligations related to the maintenance of the property.

Always do a title search before purchasing at a tax sale. This will give you a full rundown on the property so you have a clear picture before bidding.

Where Do I Find Homes Available Through A Tax Sale?

.All tax sale properties up for sale each month are published by the Ontario government via The Ontario Gazette. Make sure to investigate any property being offered to get an idea of general market values and any damage done to the property. The auctions for tax sales typically have very intense competition and they’ll require that you have a down payment and mortgage arrangements already prepared.

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