How Texas Counties Set Opening Bids at Tax Deed Auctions
When a property owner in Texas doesn’t pay their property taxes, the county has the legal right to collect what’s owed. If the taxes remain unpaid, the county can sell the property through a public auction, often called a tax deed sale.
For anyone interested in buying at these auctions, understanding how the opening bid is set is a crucial first step. It can affect whether a property is worth pursuing and how much competition you might face.
This article breaks down the process in plain language so you know exactly what to expect before you ever place a bid.
Why Opening Bids Matter
In a Texas tax deed auction, the opening bid is not just a random number—it’s the minimum price the county will accept for the property. If you don’t understand how it’s calculated, you could overestimate your potential profit or misunderstand your risk.
For investors, knowing the components of the opening bid helps you:
- Spot properties with better profit potential
- Avoid properties with inflated starting prices
- Plan your bidding strategy
Property Taxes in Texas: A Quick Refresher
Property taxes in Texas are ad valorem taxes, meaning they are based on the assessed value of the property. Every year, counties and other taxing authorities (like school districts) assess property values and set tax rates.
When property owners don’t pay these taxes by the deadline, the unpaid amount becomes a tax lien against the property. The lien gives the county the right to collect the debt, and if it remains unpaid, the county can foreclose and sell the property at auction.
The Legal Framework for Setting Opening Bids
Texas law requires counties to set the opening bid at an amount that covers certain costs. The exact rules are found in the Texas Tax Code, but in plain language, here’s what’s included.
1. Unpaid Property Taxes
This is the core of the opening bid—every dollar the property owner owes in back taxes. This includes taxes owed to all taxing entities, such as:
- The county
- The city
- The local school district
- Special districts (like water or hospital districts)
2. Penalties and Interest
Texas adds penalties and interest to unpaid taxes to encourage timely payment. These can grow quickly:
- Penalty: Usually a percentage of the unpaid tax, increasing each month after the due date
- Interest: Accrues monthly on the unpaid balance
By the time a property reaches auction, penalties and interest can be a significant portion of the total opening bid.
3. Court Costs and Legal Fees
Because Texas uses judicial foreclosure for tax sales, the county must file a lawsuit in district court. The costs of filing, serving notices, and other legal steps are added to the amount owed.
4. Administrative Costs
Counties also add the costs of running the auction and processing the sale. This may include:
- Advertising the auction
- Recording fees
- Auctioneer or online platform fees
Example: How an Opening Bid Might Be Calculated
Let’s say a property owner owes $5,000 in back taxes to the county and city, plus penalties and interest. The breakdown might look like this:
| Item | Amount |
| Back Taxes | $5,000 |
| Penalties (12%) | $600 |
| Interest (12 months) | $300 |
| Court Costs | $750 |
| Administrative Costs | $150 |
| Opening Bid Total | $6,800 |
In this example, the opening bid at auction would be $6,800.
Why Opening Bids Can Be Higher Than Expected
Sometimes investors are surprised to see high starting prices—sometimes close to the property’s market value. Here’s why that can happen:
- Multiple years of unpaid taxes have stacked up
- The property is in a district with high tax rates
- Legal and court costs are higher due to complicated title issues
- There are multiple taxing entities adding their own costs
Special Case: Post-Auction “Struck-Off” Properties
If a property doesn’t sell at auction, it becomes struck off to the county. Later, it might be offered for sale at a lower price—sometimes without a redemption period. This is where experienced investors can find hidden value.
How Investors Use This Knowledge
Knowing how opening bids are set allows investors to:
- Compare the opening bid to the property’s fair market value
- Decide whether the profit margin is worth the investment
- Factor in potential redemption penalties in Texas (25% or 50%)
By doing this homework in advance, investors avoid wasting time on properties with little or no upside.
Finding the Opening Bid Before the Auction
Counties are required to post auction notices in advance, often online or in local newspapers. These notices typically include:
- The property’s legal description
- The total amount owed (opening bid)
- Auction date and location
Many Texas counties now host these notices on their websites or through third-party auction platforms.
Tips for Evaluating an Opening Bid
- Research the property value – Use comparable sales or broker price opinions to estimate resale value.
- Check for other liens – Some liens may survive the tax sale.
- Understand redemption rights – In Texas, many properties have a redemption period during which the former owner can reclaim the property.
- Budget for extra costs – Include insurance, property preservation, and potential repairs.
Key Takeaways
- The opening bid is the minimum amount a county will accept for a property at a tax deed auction in Texas.
- It’s based on unpaid taxes, penalties, interest, legal fees, and administrative costs.
- Understanding this number helps investors decide if a property is worth pursuing.
- Always research the property and its title before bidding.
Final Word
Tax deed investing in Texas can offer opportunities for those who prepare and understand the process. The opening bid is just one piece of the puzzle, but it’s an important one. By learning how it’s calculated, you’ll be better equipped to spot good deals and avoid costly mistakes.
Disclaimer: This article is for educational purposes only and does not constitute an offer to sell or a solicitation to buy securities. Investments with Core Tax Deeds are made through a registered Regulation Crowdfunding (Reg CF) intermediary and are subject to offering terms and investor eligibility. Past performance is not indicative of future results. Please consult your financial advisor before making investment decisions.