Can purchasing property at a Washington tax lien foreclosure be lucrative?

It can be. 

Similar to a mortgage auction, the opening bid at a tax lien sale is the delinquent debt.  RCW 84.64.080. Because tax debt is typically lower than mortgage debt, opening bids are lower than those seen at mortgage auctions. Furthermore, assuming the county gave proper notice to all interest holders, the tax deed conveys clear title to the purchaser.  RCW 84.64.080.

If the auction garners little attention, a purchaser can acquire clear title to the parcel by paying only the delinquent taxes.  The question then is – what is the re-sale value of the parcel purchased?  The quality of parcels auctioned at tax sales are not always great because owners and lenders do not allow valuable land to be lost by tax auction.  If a valuable parcel makes it to auction by mistake (for example, a deceased owner and no mortgage holder monitoring tax rolls) expect competition at the auction.

This is not to say massive windfalls cannot be had. They happen; I’ve witnessed many of them.  One frequent example of a windfall occurs where the auctioned parcel has “hidden value.”  In other words, the parcel has little standalone value, but tremendous value to, say, an adjoining landowner.  I’ve seen a small strip of land re-sell after auction for a relatively large amount of money where the strip was necessary for the adjoining owner’s ingress and egress.  I have also seen a purchaser acquire a parcel that contained a tiny piece of the adjoining owner’s improvement (a large and valuable home in Bellevue, WA).  In that case, the tax lien purchaser was able to force a sale of the Bellevue house and recouped half the proceeds.

For those interested in investing in tax sales, connecting with experienced Washington counsel is important.  Counsel can guide the purchaser through the process and troubleshoot issues as they arise.