How Tax Sales Work in Canada

Tax sale rules in Canada vary by province. Tax sales involve the sale by public auction of properties within a given municipality. The municipality collects these properties after an extended period of unpaid property taxes.

The municipality then sells them at a discount to recoup the property taxes owed. This provides an amazing opportunity for investors to purchase tax-sale homes and earn a return that sometimes far exceeds what can be earned through other investments.

Here is a little more about how tax sales work in Canada.

Tax Sale Homes Are Tax Delinquent Properties

Tax sales are exclusively tax-delinquent properties. When you buy an Ontario tax sales home, you pay the property taxes and all associated fees, such as penalties and interest associated with the home, relating to the purchase.

Tax Sale Homes: Public Auction vs. Public Tender

Tax sale homes are sold either by public auction, where there is a public event where would-be investors make bids or by public tender, where individuals looking to buy can make bids by mail over an extended period.

Buying a Tax Sale Property Is Given to The Highest Bidder

A tax sale property is sold to the highest bidder, in either the case of a public auction or public tender.

See Public Notices for Tax Sales In Canada Online

Find out what tax sale properties are available by looking at public notices online posted by your local municipality. Public notices contain limited information. They are likely to share the time and place of the tax sale, terms of submitting a bid, a legal description of the property, and the street address. There may be photos included, but there may also not be.

Mortgages Are Deleted in a Tax Sale

Mortgages and liens are wiped away from a tax-sale property. All claims to the property are removed in a tax sale except any Crown claims, be they federal or provincial. For peace of mind, a would-be bidder can search a title on a tax sale home to see what claims, if any, are present.

You Cannot Inspect a Tax Sale Property

Buyers purchase tax-sale homes as-is and without having done any home inspection. Would-be tax sale investors do not have the right to inspect a home, enter to evaluate the property themselves, and cannot request an inspection of any kind.

If You Buy a Contaminated Property, It’s Your Responsibility

As you can’t see the property, you don’t know fully what you’re buying with a tax sale home. As much research as you can do, when you buy a tax sale property that is environmentally contaminated or damaged, it is the owner’s responsibility to take care of it.

In this case, the owner is you. A contaminated property, for example, is your liability, and you must fund the cost of the cleanup.

Purchase Price Must Immediately Be Paid

If you are found to be the winning bidder on a tax sale home, the purchaser must pay the municipality the amount of the purchase price immediately. If they cannot cover the total cost, the property either goes to the next highest bidder or is offered for sale at the next tax sale.

The Previous Owner Has a Redemption Period

The owner can redeem a tax sale property for some time following the tax sale date. If this happens, the winning bidder gives up their ownership claim, and the property reverts to the current owner. The bid is then returned in full.

When You Become Owner of a Tax Sale Property

After payment has been received in full, the municipality offers a tax deed registered on the title. As soon as the deed is registered, the purchaser becomes the property owner, with the only hindrance being that the redemption period must have passed before this happens.

11. If There Are People Still Living In A Tax Sale Home

If you buy a tax-sale home with people refusing to leave or people still living in it, the municipality is not obligated to help you evict them. To pursue an eviction, you must hire a bailiff or lawyer to launch a legal eviction process.

12. The Prices Are Amazing, But The Risk Is Yours

With a tax sale home, you may discover you can purchase a home for less than half its worth. It may sound too good to be true, but it’s not because the risk is all yours. Not all tax-sale homes are amazing investments. Do your research. You can easily end up having to sink thousands of additional dollars into a tax sale property to fix up renovations and handle various issues. Then, some will be worth nothing if you don’t have a land development or redevelopment plan. The key is always to do your research.

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