Pennsylvania Tax Sales: What is an Upset Sale?

If you are going to bid at Pennsylvania tax sales you need to be aware of the different types of deed sales that are conducted in the Commonwealth. Many Pennsylvania counties have two different tax sales that are live auctions; the "upset" sale, and the "judicial" sale. If tax sale properties are not sold at either of these two sales, the property then goes on the "repository" list and can be sold by private bid.

Most counties will have an upset sale every year in the fall. It’s called the "upset" sale because the minimum bid for the properties in this sale is the "upset" price – what is owed for delinquent taxes from the county as well as any municipal liens. If a property is not sold in this sale, it then goes into the "judicial" tax sale which many counties will hold in the spring. Not all Pennsylvania counties have judicial tax sales but they all have an upset sales. The exception to this is the city of Philadelphia which has redeemable deed sales. The city of Philadelphia has also recently instituted an annual tax lien sale in addition to the redeemable deed sales. It is my understanding that this has also been tried in a couple of the other major cities in PA, but I’m not sure if they are still selling liens or have reverted back to deed sales like the rest of PA.

What is an Upset Sale Anyway?

What you may not know about the upset sale is that all properties are sold subject to any liens or judgments. That means that if you purchase a tax deed at this sale, you are responsible for any other unpaid liens or judgments on the property. Most people assume that when they buy a property at a tax sale, that they don’t have to worry about other liens such as a mortgage. This is not true at the upset sale. If you plan on bidding at any of these sales this fall, you’d better do your homework!

So how do you find out about other liens or judgments on tax sale properties? There are two ways that you could do this; one is going to cost you some money and the other is going to take some of your time. The first way is to hire a title search company to do a simple title search on all of the properties in the sale that you are interested in bidding on. This could turn out to be a little costly, so it’s not my method of choice. Another reason why I don’t hire a title search company to do title searches for me before the sale is that many of the properties will come off the tax sale list the day before or the morning of the sale. You may pay for a few title searches that you don’t even need because the properties that you wanted to bid on are no longer in the tax sale.

That brings us to the second method for finding out about liens and judgments on tax deed properties, and that is to do it yourself. There is a little bit of education and sometime involved, but it is well worth it. In most states, to do this type of research you would go to the County Hall of Records. In Pennsylvania the office that has the records that you need to search is the office of the Prothonotary. The people in this office are usually very helpful and will help you to look up what you need to know. You’ll have to look for liens and judgments by the name of the owner. If there are co-owners or joint owners, you will want to search under both names. In some counties deeds and mortgages may be filed by the county recorder and not the Prothonotary, so you may have to search the county recorder’s public records as well. Some counties will have this information available online. For others you will have to go to the county recorder’s office and the Prothonotory’s office to look the information up on their computer system.

Keep in mind, however, that if new liens were not yet recorded they could slip through the cracks in the system and you won’t be able to find them. There is always some degree of risk when you buy a tax deed, even if you are careful and do your homework. This is why it is always recommended that you do not buy tax deeds in your own name, but in the name of a separate entity. It could be a corporation or an L.L.C.

Find out more about Pennsylvania tax sales in this podcast episode that I did with Jeff Frantz of Tax Title Services. You can listen to the replay at PA Tax Sales – Podcast Episode #91 at http://taxlienlady.audioacrobat.com/download/taxlienlady-20150914090949.mp3.