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8170-8178 Public Auction: Pre-Sale Considerations

8170. RULES OF PUBLIC AUCTION
The Revenue and Taxation Code sets forth no procedures or rules for conducting a public auction. The tax collector may establish whatever rules or procedures he/she deems appropriate in order to achieve the sale of the properties. Recommended procedures are found beginning with M-8181.

8171. INFORMATION FOR PROSPECTIVE PURCHASERS
Participation by bidders can be increased by giving adequate publicity and making information available to potential purchasers.

Lists of properties to be sold (or copies of the published notice) can be made available in the tax collector’s office prior to the sale and at the time and place of sale. Assessor's maps are helpful when made available to the public for inspection.

It may be helpful to maintain a regular list for the mailing of sales information to attract a larger group of potential purchasers.

8172. QUESTIONS AND ANSWERS REGARDING CHAPTER 7 SALES
A public auction tax sale information sheet may be provided containing answers to the most frequently asked questions about the public auction of tax-defaulted real properties.

Following is a list of questions that are frequently asked at sales. The answers provided respond on a general level. These answers should be revised as necessary to reflect the policies of the specific tax collector’s office.

1)       Q. Can I mail in or submit a sealed bid for a property in the auction?

A. No. The in-person public auction requires your presence, or that of your representative, to bid verbally on the properties. An electronic auction requires bids to be made by electronic means during the auction period.

2)       Q. Can I obtain a property available at the tax sale by paying the delinquent taxes on it prior to the tax sale date?

A. No. Legal title to tax-defaulted property subject to the tax collector's power to sell can be obtained only by being the successful bidder at the county tax sale.

3)       Q. How do I find or see a property I'd like to bid on at the tax sale?

A. While we try to give all possible assistance in helping prospective purchasers to pin-point a property location, vacant land (which accounts for most of the property offered at our tax sale) has no address. A vacant parcel’s approximate geographic location can be determined through the use of county assessor plat maps and perhaps a map book. Exact boundary lines of a property can be determined only by a survey of the property initiated at the purchaser's expense. Improved properties frequently (but not always) bear a street address. 

4)       Q. How can a bidder pay for a property at the tax sale?

A. Payment must be made in cash or certified funds (cashier's check, certified bank check, certified personal check, money order, or traveler's check, with proper identification) or by electronic funds transfer. Personal checks are not accepted.

5)       Q. What are the conditions of payment for a property at the tax sale?

A. All sales require full payment, which includes the transfer tax and the recording fee. The tax collector may allow a deferred payment option and require an advance deposit of $5,000 or ten percent of the minimum bid amount, whichever is greater, to be deposited with the county. A failure to consummate a credit transaction will result in the forfeiture of the deposit, a five-year ban on participation in future auctions, and a claim against the recalcitrant bidder. 

The balance is payable in lawful money of the United States or electronic funds transfer, credit card payment, or negotiable paper, as specified by the tax collector, within a period specified by the tax collector not to exceed 90 days from the date of the auction, as a condition precedent to the transfer of title to the successful purchaser (Rev. & Tax. Code §3693.1).

6)       Q. Do liens or encumbrances on a tax-defaulted property transfer to the new owner after purchase of the property at a tax sale?

A. Chapter 7, section 3712, of the California Revenue and Taxation Code states: The deed conveys title to the purchaser free of all encumbrances of any kind existing before the sale, except:

a. Any lien for installments of taxes and special assessments, which installments become payable upon the secured roll after the time of the sale; 

b. The lien for taxes or assessments or other rights of any taxing agency that does not consent to the sale under this chapter;

c. Liens for special assessments levied upon the property conveyed that were, at the time of the sale under this chapter, not included in the amount necessary to redeem the tax-defaulted property, and, where a taxing agency that collects its own taxes has consented to the sale under this chapter, not included in the amount required to redeem from sale to the taxing agency;

d. Easements constituting servitudes upon or burdens to the property; water rights, the record title to which is held separately from the title to the property; and restrictions of record;

e. Unaccepted, recorded, irrevocable offers of dedication of the property to the public or a public entity for a public purpose, and recorded options of any taxing agency to purchase the property or any interest therein for a public purpose; 

f. Unpaid assessments under the Improvement Bond Act of 1915 (Division 10 (commencing with §8500) of the Streets and Highways Code) that are not satisfied as a result of the sale proceeds being applied pursuant to Chapter 1.3 (commencing with §4671) of Part 8, or that are being collected through a foreclosure action pursuant to Part 14 (commencing with §8830) of Division 10 of the Streets and Highways Code. A sale pursuant to this chapter shall not nullify, eliminate, or reduce the amount of a foreclosure judgment pursuant to Part 14 (commencing with §8830) of Division 10 of the Streets and Highways Code;

g. Any federal Internal Revenue Service liens that, pursuant to provisions of federal law, are not discharged by the sale, even though the tax collector has provided proper notice to the Internal Revenue Service before that date (Note:  A title search initiated at the prospective purchaser's expense should reveal any liens or encumbrances on a property in the tax sale.); and, 

h. Unpaid special taxes under the Mello-Roos Community Facilities Act of 1982 that are not satisfied as a result of the sale proceeds being applied pursuant to Chapter 1.3, commencing with Revenue and Taxation Code section 4671, of Part 8.

7)       Q. When does the right to redeem a tax-defaulted parcel subject to the power to sell cease?

A. The right to redeem ceases at the close of business on the last business day prior to the sale. 

8)       Q. How can I determine what use I can make of a tax sale property before I purchase it?

A. Consult the zoning department of any city within which a property lies or the zoning section of the county department of planning and land use for a parcel in an unincorporated area (i.e., not lying within a city boundary) regarding use of the parcel. Examine the county recorder's records for any recorded easements on a property. You can also order a title search report from a local title insurance company.

9)       Q. How soon can I take possession of a property after my purchase at the tax sale?

A. You should consult an attorney. Generally, the successful bidder may take possession of a property after making payment in full and complying with any conditions set forth between the tax collector and the successful bidder.

10)     Q. How is the minimum bid price on a property determined?

A. State law dictates that the minimum price should be no less than the total amount necessary to redeem the property, plus costs. The minimum bid on a property can be set at a greater amount, to ensure collection of delinquent taxes, penalties and costs.

11)     Q. Is a tax sale publicly advertised?

A. Yes. State law dictates that notice of a tax sale must be published three times in successive seven-day intervals before the tax sale date, in a newspaper published in and of general circulation within the county.

8173. TRUTH AND DISCLOSURE AT PUBLIC AUCTION
If the property being offered for sale is affected by some hazard and that fact is known to the tax collector, this information should be disclosed to the potential bidders before the parcel is offered for sale.

Some conditions, which should be disclosed, are the following: 

1) During the parties-of-interest search, an IRS lien was discovered. Bidders should be informed that the IRS may exercise its right of redemption up until 120 days after the sale.

2) There may be a 1911 delinquent bond that must be paid current, in addition to the purchase price of the parcel. 

3) This parcel is known to contain toxic agents and may constitute a chemical hazard.

4) A taxing agency has objected to the sale to preserve its lien.

5) The purchaser may be subject to an additional transfer tax due a city.

8174. RECEIPTS
Receipts should be prepared in duplicate for each parcel prior to the sale (form SCO 8-06 is suggested). All items for which information is available should be completed (M-8182). 

8175. ASSISTANCE AT THE IN-PERSON AUCTION
The tax collector or his/her deputy shall conduct the sale (Rev. & Tax. Code §3706). Cashiers and support staff may be necessary if there are many properties to be sold. When cash sales are anticipated, measures to maintain adequate security may be initiated at the tax collector's discretion.

8176. ABSENT BIDDERS
This section was deleted on January 1, 2005.

8177. REDEMPTIONS
The tax collector should make arrangements to accept all redemptions tendered before the close of business on the last business day prior to the date the sale begins. Time permitting, the tax collector should verify that any personal checks submitted as payments will be honored by the bank. The tax collector may require that redemption payments made within a certain time before the sale be made in cash, money order, or cashier's check (Rev. & Tax. Code §3707(c)).

8178. RECEIPT OF REDEMPTION PAYMENT
Any remittance sent by U.S. mail or personal delivery service must be received in the tax collector's office prior to the close of business on the last business day prior to the date the sale begins. If the remittance is not received by that time, the right of redemption terminates (Rev. & Tax. Code §3707). If a redemption payment is received after the deadline on property that is subsequently sold, the payment should be returned to the sender.

This expression of the law should not be confused with the timelines presumed when a postmark shows that a tax installment was deposited in the mail or when an air bill or packing slip shows that a tax installment was deposited with a personal delivery service before the delinquency deadline, even though it is not received by the county until sometime later (Rev. & Tax. Code §2512). 

A payment received in the tax collector's office before the time prescribed by law overturns a subsequent sale, unless the redemption check is not honored upon presentment. Therefore, it is important to screen all incoming mail and deliveries promptly just before an auction or other sale. If time permits, the tax collector should verify with the bank that a redemption check will be honored. If the redemption check is not honored, the redemptioner is liable to the county for (in addition to the amount owed) damages of three times the amount of the check, but in no case less than $100 nor more than $1,500 (M-1244 and M-8199).