A tax deed does not deliver a property free and clear of everything. Mortgages generally get wiped in the foreclosure, but county and city liens — code enforcement, demolition orders, municipal charges — survive and become your problem the day you take title. That single distinction is the reason tax deed due diligence is a written checklist rather than a habit, and why skipping one confirmation call can cost more than the deal was ever going to make.
Thomas Senatore has bought tens of thousands of tax liens and several hundred properties over roughly three decades, starting as the senior tax-foreclosure paralegal at a New Jersey real estate law firm. He has also made two of the expensive mistakes in this category and watched a student make a worse one.
Below: what actually survives the sale, the two verification steps that caused six-figure exposure when they were skipped, how to price a bid, and the title-clearing math that determines whether the lien is worth buying at all.
Key takeaways
- County and city liens — including code enforcement and demolition orders — survive a tax deed foreclosure. The "free and clear of all liens, judgments and encumbrances" pitch is incomplete.
- Never assume a state’s delinquency statute was enforced. Senatore bought a $150K New Jersey lien assuming three years of back taxes; the tax collector’s written payoff came back at roughly $280,000 on eight-plus years unpaid.
- Reading that a code violation exists is not due diligence. Read the actual notice. A Fort Myers buyer confirmed a violation, skipped the document, and returned from vacation to find both houses demolished and roughly $15,000 per house billed to him.
- Investors lose to owner-occupant bidders because homeowners bid to retail. If a tax deed property can’t be acquired under about 60% of value, walk.
- Title clears in two to three months for a couple thousand dollars if you need to sell fast, or automatically over three years if you’re holding and renting.
From the Real Estate Pros Show
This article draws on an interview with Thomas Senatore of TLD International on the Real Estate Pros Show, hosted by Meghan Escobar.
What a Tax Deed Actually Wipes Out — and What It Doesn’t
Start with the distinction most training programs blur. A tax lien is an interest-bearing note in first priority position on the property. You are the lender, and you earn a statutory rate — Senatore’s best returns on liens ran 18% to 19% per year. A tax deed is different: the county sells the property itself, and you become the owner.
Where the sales pitch breaks down is on what the foreclosure clears. Senatore is direct about it:
“People think that when they buy a tax deed there’s companies out there that teach it saying that you own the property free and clear of all liens, judgments, and encumbrances. That’s not a true statement. County and city liens survive a foreclosure.”
Mortgages generally do get wiped, and that’s the part every seminar leads with. What gets left out is that a municipal code violation — Senatore has seen them run into six figures — comes through the sale intact and attaches to you. So does the underlying obligation to satisfy county charges you never inspected.
The practical consequence: the value of a tax deed is not the winning bid. It is the winning bid plus every surviving governmental lien plus whatever the property physically needs. Two of those three numbers require a phone call to a public office and a document you actually read. Neither is difficult. Both get skipped by investors who are confident they already know the answer.
Senatore doesn’t describe himself as a risk taker. “We call it mitigating the risk. We’re not risk takers. We analyze the risk.” The analysis is the checklist, and the checklist only works if you complete it every time.
The Back-Tax Verification Step Almost Nobody Makes
Call the tax collector and get the payoff in writing before you bid. Every time, on every property, even when you are certain the statute limits your exposure.
Senatore learned this in Bergen County, New Jersey. The property was a well-maintained home on a large lot in a wealthy neighborhood, valued somewhere between $300,000 and $400,000. The tax lien was available at $150,000. He and his partner drove the exterior — manicured grounds, good condition — and made the reasonable inference that the interior matched.
Then they skipped the confirmation call, for a reason that sounds sensible until it doesn’t. New Jersey’s statutory framework meant taxes shouldn’t go more than three years delinquent before someone forecloses, because that’s what every investor in the state waits for. So the exposure was capped. Obviously.
He only called the tax collector after the purchase, to get a payoff for the foreclosure filing. The clerk needed to research and call back. Three hours later:
“Is this Mr. Senatore? Are you sitting down? You owe $280,000 in back taxes. They have not paid taxes in over eight years.”
The deal survived on equity alone. After expenses, they cleared about $10,000 on a property they had modeled as a large win — and they could have lost a couple hundred thousand dollars if the value had been lower.
The lesson is narrower than “do your homework.” It is this: a statutory limit is a description of what should have happened, not a record of what did. Municipalities miss foreclosures. The only number that binds you is the payoff figure the collector produces, and you want it before the auction, not after.
People think that when they buy a tax deed, you own the property free and clear of all liens, judgments, and encumbrances. That’s not a true statement. County and city liens survive a foreclosure.
— Thomas Senatore, TLD International
Code Enforcement: The Lien That Can Delete the Asset
Confirming that a code violation exists is not the same as knowing what it says. That gap cost one of Senatore’s students close to $60,000 in Fort Myers.
The student found a good lot with two houses on it. He was told to check code enforcement, and he did — there was a violation on file. He treated the existence of a violation as an item checked and moved on. He won the auction. Senatore told him to confirm the amount and get it paid off immediately. Instead, excited about the win, he went to Disney World for a week.
He came back and brought a contractor out to price the renovation on both houses. The houses were gone.
The document he never opened was a condemnation notice with a notice of demolition attached. The city leveled both structures on schedule. He was then billed roughly $15,000 per house for the demolition — $30,000 out of pocket on top of losing the two buildings entirely.
Senatore’s point about the avoidable part matters more than the loss itself. Had the buyer contacted code enforcement, identified himself as the new owner, and stated that he intended to rehab both structures, the demolition may well have been called off. Municipalities generally want the violation cured, not the building destroyed. Nobody at the city knew a buyer with a rehab plan existed.
So the code enforcement step has three parts, not one: confirm a violation exists, pull and read the actual notice including any deadlines or orders attached to it, and contact the department directly to state your intent and get the payoff amount. A violation with a demolition order is not a lien you price into the deal. It is a countdown clock.
Pricing the Bid: The 60% Ceiling and Auction Mechanics
Senatore’s threshold is simple: if he can’t acquire the property under 60% of value, the deal doesn’t make sense. That leaves room for surviving liens, rehab, holding costs, title work, and a return that justifies tying up cash.
The main thing pushing bids past that ceiling is not other investors. It’s owner-occupants.
“The biggest threat is a homeowner going to the auction without any education, training, classes, knowledge, and they’ll bid the property to the retail value. Whenever we’re trying to buy something and we’re competing with a homeowner, you’ll never win, because an investor, we’re not going to pay 90% of value of a property.”
You cannot outbid someone who is buying a place to live and doesn’t need a spread. Recognize that dynamic early in the bidding and stop.
What limits the field back in your favor is the cash requirement. Most tax deed auctions require funds within 24 hours of the win. That thins out casual bidders quickly, and it’s a reason to have liquidity staged before you register rather than after.
Two mechanical points that have changed since Senatore built his original process. Sales used to be on courthouse steps; his old operations manual told students to arrive early and bring an umbrella. Nearly everything is online now, which shifts the risk to your connection. Log in early. Use a wired or verified stable connection. As he puts it, if your computer freezes mid-bid and you don’t add another $100, you just lost a property you were going to make six figures on.
Price the bid off confirmed numbers — payoff figure, code enforcement balance, rehab estimate — and set your walk-away before the auction opens.
Exit Strategy and Title Clearing Before You Bid
Decide the exit before you buy, and name a second one. Senatore runs two alternatives on every deal based on the numbers: buy-fix-sell if it’s an area he doesn’t want to hold in, or buy-rent-hold if the neighborhood produces cash flow. His rentals have run roughly 15% to 20% annually, which returns capital in about five years.
The deal that taught him this had no exit at all. He bought an assigned tax lien in Jersey City — $45,000 face value, purchased for $30,000, on a mixed-use building with four apartments and two stores. The plan was redemption inside 60 days for a quick $15,000. Redemption never came, and he found himself the owner of a building he had never seen. He was the fifth investor to look at that lien; the first four walked.
He put roughly $150,000 into it, took two and a half years, and sold for $850,000. Good outcome, wrong process.
On title, the timeline is short enough that it rarely kills a deal but long enough to plan around. If you want to sell quickly, expect two to three months and a couple thousand dollars to clear title — which lines up neatly with a rehab schedule. If you’re holding and renting, title clears through time at roughly three years, and you save the clearing cost entirely.
The other half of Senatore’s exit thinking is velocity over maximum profit. He bought a Port Charlotte house sight unseen for $50,000, on a canal with a seawall and gulf access, against about $150,000 in assessed value. He listed it on eBay with photos at $90,000 and sold in five days — after being told it couldn’t move in 60 to 90.
“It’s not how much money you make, it’s how quickly you can turn the money and reuse it.”
The Power Team That Makes Tax Deed Work Survivable
Tax deed properties come with unknowns you can’t fully price at auction, which means your team is your actual risk control. Senatore’s advantage on the Jersey City building was that he had been a general contractor before he was a paralegal. He handled the interior remodel himself and pulled his own permits, hiring a licensed electrical contractor only for the main service. He got wholesale pricing from trades who knew him.
Without that background, he estimates the same job could have cost $300,000 instead of $150,000 — because he’d have been paying retail plus profit on every line.
Most investors won’t have that skill set. The answer isn’t to acquire it; it’s to build around the gap. “Have these people that can do the things that you’re not good at, and you’re going to put in the things that you’re good at that they may not be good at.”
The relationships he has kept close for decades:
- A CPA who handles the annual work and understands his structures
- A real estate attorney for the foreclosure and title side
- A title company that closes everything he does, so quiet-title timelines are predictable
- Trades he has a history with, priced below retail because of the relationship, not the volume
The same principle explains his self-directed Roth IRA, which holds two of his rentals. It isn’t a tax tip — talk to your own CPA about whether a self-directed account fits your situation — it’s an example of building specialist relationships around a chosen strategy instead of improvising deal by deal.
Senatore now runs a very small operation after firing an entire 15-person company over a theft, and the surviving structure is deliberate: a handful of trusted specialists on retainer, and one phone call to reach any of them.
Frequently asked questions
Do code enforcement liens survive a tax deed foreclosure?
Yes. Code enforcement liens are municipal liens, and county and city liens survive a tax deed foreclosure. Senatore has seen code violations in the six figures pass through the sale to the new owner.
Worse, some code files carry a condemnation notice with a demolition order attached. In a Fort Myers case, the city demolished both houses on a lot the buyer had just won, then billed him roughly $15,000 per structure. Read the actual notice, not just the summary line showing that a violation exists.
How long does it take to clear title after buying a tax deed?
About two to three months and a couple thousand dollars if you need clean title to sell quickly. That timeline usually runs in parallel with a rehab, so it rarely delays a flip.
If you plan to hold and rent, title clears through time at roughly three years in Senatore’s experience, and you avoid the clearing expense. Timelines vary by state and county, so confirm locally with your title company before you build the exit around a date.
What return should I expect from a tax lien versus a tax deed?
Tax liens are interest-bearing notes in first position, and the best Senatore has personally earned is 18% to 19% per year. That’s a real return, but it’s a fixed ceiling and you’re dependent on redemption.
Tax deeds make you the owner, which is why he moved to that side of the business — he targets 30% to 40% per year. The tradeoff is that you inherit the property’s condition and every surviving municipal lien, so the higher return is compensation for real work and real risk.
Why do investors lose auctions to owner-occupant bidders?
Because homeowners bid to retail value and investors can’t. An owner-occupant is buying a place to live and doesn’t need a margin, so they’ll take the price to 90% of value or higher.
Senatore’s rule is that if he can’t get in under 60% of value, the deal doesn’t work. When you identify a homeowner in the bidding on a property they want to live in, stop. The one structural advantage investors have is the 24-hour cash requirement most auctions impose, which removes bidders who can’t fund immediately.
What should be on a tax deed due diligence checklist before the auction?
At minimum: a written payoff figure from the tax collector confirming actual years and amount of delinquency; a full code enforcement search with the underlying notices pulled and read; a search for other county and city liens that survive foreclosure; a physical inspection or at least an exterior drive-by; and a rehab estimate.
Then set your maximum bid at a number that keeps total cost under roughly 60% of value, and name both a primary and a backup exit before you register. Senatore’s core rule is that you do not skip an item because you already know the answer — “you could be right, but you could also be wrong.”
The bottom line
Before your next auction, build the checklist as a document with signature-required items — tax collector payoff in writing, code enforcement notices pulled and read, surviving municipal liens searched — and refuse to bid on any property where a line is blank. The two costliest failures in this article both came from an experienced investor or his student being confident enough to skip a phone call that would have taken twenty minutes.
