Wholesaling Tax Delinquent Properties in Texas

The short answer

When do Texas property taxes become delinquent?

On February 1. Taxes not paid by January 31 start collecting penalties and interest the next day.

The penalty starts at 6 percent plus 1 percent interest and climbs each month, reaching 12 percent penalty by July. Taxing units can then add a collection fee of up to 20 percent when they hand the account to an attorney. After that comes a tax lawsuit, a judgment and a sale, so many delinquent owners are under real pressure long before the auction.

The opportunity

Why tax-delinquent owners sell to Texas wholesalers

A tax debt is not like a mortgage. It cannot be refinanced easily, the balance grows every month, and the county will not negotiate the penalties away. Owners with inherited houses, vacant rentals or second homes often decide that selling, paying the taxes at closing and keeping the rest is the best way out.

Lead sources

How to find tax delinquent properties in Texas

• County tax office records. Most county tax assessor-collectors let you search accounts and see what is owed. Some publish delinquent lists or sell them.
• Tax suit filings. Delinquent tax suits are filed in district court. These cases name the owners and the property, and come well before any sale.
• Attorney sale lists. Law firms that collect for counties post upcoming tax sale lists. Use them as a final-chance list, not your main source.
• Data providers. List services pull delinquent accounts across counties. Learn the trade-offs in our tax delinquent list guide.
• Stack with other signs. A tax-delinquent owner who is also an absentee owner or has a vacant house is usually the most motivated.

Your exit

Pricing a deal with back taxes

Treat the full tax payoff, including penalty, interest and collection fees, like a lien that comes off the top. Get the payoff from the tax office for the month you expect to close, because the number changes every month.

Also check for a transferred tax lien. In Texas, an owner can borrow from a property tax lender to pay the taxes, and that lender then holds a lien with the same priority as the county’s. It must be paid at closing too.

Step by step

How to start wholesaling tax delinquent properties in Texas

1. Build the list. Pull delinquent accounts for one county and filter out businesses and tiny balances.
2. Check for deferrals. Remove owners with an over-65 or disability tax deferral on their homestead. They are protected from a forced sale.
3. Find and contact owners. Skip trace the owners and reach out with a clear, respectful offer.
4. Get the payoff. Ask the tax office for the amount due through your expected closing month.
5. Run the numbers. Subtract taxes, any mortgage and any tax lender lien, then set your offer with the MAO calculator.
6. Sign and disclose. Use a purchase contract and give the written disclosure that you may assign it.
7. Close through title. Title pays the taxes and liens and sends the owner the rest.

An heir in Houston inherited a small frame house that sat empty for three years. Nobody paid the taxes, and the account was referred to the county’s collection attorneys, adding the 20 percent collection fee on top of penalty and interest. A tax suit had just been filed when you found the case and skip traced the owner, who lives in another state.

The tax office quoted a payoff of about $14,600 through the month you expected to close. There was no mortgage and no transferred tax lien. You signed at $75,000 with the written assignment disclosure, and a landlord who buys small frame houses in that area paid $85,000 for the assignment because the house could rent quickly after $40,000 of work.

Title paid the full tax payoff at closing, which ended the tax suit, and sent the heir about $60,400 before closing costs. Had the case gone to judgment and a tax sale, the owner would have kept only any excess proceeds after the county’s costs, and a buyer at that sale would have faced a redemption period before owning the house cleanly.

Texas rules to know

Redemption rights after a Texas tax sale

Buying at a Texas tax sale is not like buying a clean house. The former owner can redeem a homestead or agricultural property for two years after the sale, and other property for 180 days. They pay the buyer back plus a premium of 25 percent in the first year and 50 percent in the second year on homesteads.

That right makes tax sale purchases hard to resell quickly, which is why most wholesalers stay on the front end of the process, before the suit or the sale, where the owner can still sell with a normal deed.

Learn it with a mentor

Build your first tax delinquent list with us

Mentorship students build and filter a county list with a mentor, then review their first offers before they go out.

FAQ

Tax Delinquent Properties in Texas: common questions

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