If you’ve been exploring tax lien and deed investing, you’ve probably heard about over-the-counter (OTC) tax sales. It sounds appealing—buying properties or liens without the competition of an auction? Who wouldn’t want that? But before you dive in, there are some important things you should know. While OTC tax sales can be profitable, they also come with potential TRAPS that could turn your investment into a HEADACHE.

In this article, we’ll cover Top 10 Over-the-Counter (OTC) Mistakes You Need to Avoid. Whether you’re just starting or a seasoned investor, staying aware of these pitfalls can help you make smarter, safer investments.

Let’s jump in and make sure you know the Over-the-counter (OTC) Mistakes You Need to Avoid. Ready? Let’s go!

Skipping Due Diligence

It might seem tempting to jump on a property listed OTC, but skipping due diligence can lead to costly surprises. Always research the property’s condition, location, and any legal or title issues before making a purchase. Many OTC properties are leftovers from auctions because of significant problems like environmental contamination, structural damage, or being landlocked.

Ignoring Additional Liens

OTC properties may come with undisclosed liens, such as unpaid utility bills, mortgages, or other debts. If you’re unaware of these liens, they can wipe out any potential profit. Always check the public records for outstanding liabilities.

Not Understanding Title Issues

One common pitfall is purchasing a property with unresolved title issues. If the title isn’t clear, you may not have full ownership rights, and it could be a headache to resell or develop the property. Always conduct a title search or hire a title company to avoid this mistake.

Overpaying

OTC properties are often sold for the amount owed in back taxes, interest, and fees. However, the property’s market value may not match what you pay. Compare the back taxes with the property’s current market value to avoid overpaying.

Assuming the Property is Ready for Development

Many OTC properties are not immediately buildable. Some may be too small, located in a flood zone, or otherwise unsuitable for construction. If you’re not careful, you could end up with a worthless piece of land.

Buying Properties Without Visiting

Pictures and descriptions online can be misleading. If possible, visit the property before purchasing or work with a local representative to inspect it. Issues like poor access, environmental hazards, or hidden damages might only be visible in person.

Assuming Immediate Profit

Just because you can buy OTC properties at a discount doesn’t mean you’ll make an instant profit. Some properties might sit on the market for a long time, while others may require significant repairs or legal work before they can be resold or rented.

Overlooking Property Taxes

After purchasing a tax lien or deed, the responsibility for future property taxes falls on you. Failing to stay on top of these payments can result in additional penalties or even the loss of the property.

Waiting Too Long to Buy

The best OTC properties get scooped up quickly. If you wait too long, you may miss out on high-value properties. Check OTC lists frequently and act fast when you find a good deal.

Neglecting Legal Compliance

Each state and county has different rules regarding OTC sales. Failing to follow the correct procedures can lead to delays or even legal trouble. Ensure you understand the local laws and regulations before purchasing.

Pro Tips:

• Always perform thorough due diligence: This includes title searches, property condition assessments, and verifying the presence of any other liens.

• Consult a real estate attorney: Especially if you are new to tax lien investing, getting legal advice is invaluable.

• Focus on areas you know: Stick to counties and states where you are familiar with the market and regulations.

FAQs for Over-the-Counter (OTC) Mistakes You Need to Avoid

What makes OTC properties riskier than auction properties?
OTC properties are usually the ones that didn’t sell at auction, often because they have problems such as liens, poor location, or structural issues. This is why extra caution is needed.

How do I find OTC properties?
Check with county tax offices or visit their websites. Some counties publish lists online, while others may require you to request the list in person.

Can I negotiate the price of an OTC property?
In some cases, yes. Some counties are open to negotiation, especially if the property has been on the OTC list for a while.

Avoiding common mistakes can make all the difference in your OTC tax lien and deed investing success. Now that you’re familiar with the Top 10 Over-the-counter (OTC) mistakes review your strategy and ensure you’re on the right track. Learn from these mistakes, stay informed, and confidently approach each deal. Ready to step up your game? Start applying these insights to avoid costly errors and maximize your investment potential! Want to learn more? You can book a call, and I am happy to help.

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