Tax Lien Certificates

Did you know your home could be sold at auction to pay unpaid property taxes? It sounds scary, but it also creates an opportunity for investors. Today, we’ll explore Tax Lien Certificates, a way to potentially earn high returns from delinquent property taxes.

  • What are Property Taxes? Property taxes are annual fees you pay to your local government to maintain essential services like schools and roads.
  • What are Tax Liens? If property taxes go unpaid, the government can place a lien on the property. This essentially means the government has a legal claim on the property until the taxes are paid.

Disclaimer:

Investing in tax lien certificates, tax deeds and redeemable deeds involves inherent risks and complexities. The information provided here is for informational purposes only and should not be considered financial or legal advice.

We strongly recommend seeking professional guidance from:

• Tax advisor: They can advise on tax implications of buying tax liens, tax deeds and redeemable deeds.

• Real estate attorney: They can navigate the legal processes involved in acquiring and potentially foreclosing on properties.

• Title company: They can research and verify the property title and any potential claims.

  • How it Works: When property taxes remain unpaid for a certain period (varies by location), the government can auction off tax lien certificates.
  • Who can Participate? These auctions are typically open to the public, allowing you to become an investor.
  • The Auction Process: There are two main ways auctions are conducted:
    • Interest Rate Bidding: You bid on the interest rate you’re willing to accept on the back taxes. The investor offering the lowest interest rate wins.
    • Premium Bidding: You bid a premium amount above the delinquent taxes. The highest bidder wins.
  • Your Earning Potential: Once you win a tax lien certificate, you earn interest on the back taxes owed by the
    property owner. The interest rate is typically set by the government and can be quite high.

  • How to Find Auctions: Many counties hold tax lien certificate auctions online. There are also websites specializing in listing tax lien auctions nationwide.
  • Due Diligence: Before bidding, research the property and the tax situation. This might involve checking for outstanding mortgages or potential title issues.
  • What Happens if the Property Owner Doesn’t Pay? If the property owner doesn’t pay the back taxes plus interest within the redemption period (again, varies by location), you may be able to foreclose on the property.
  • Recap: Tax Lien Certificates is a way to invest in delinquent property taxes.

  • What are tax deeds? If the property owner doesn’t redeem their property by paying the back taxes and interest within the redemption period (set by law), the investor who holds the tax lien certificate can potentially obtain a tax deed.

  • Foreclosure Process: Obtaining a tax deed involves initiating a foreclosure process on the property. There are specific legal procedures involved, and it’s recommended to consult with an attorney specializing in tax deeds.
  • Timeframe: The foreclosure process can take several months, depending on your location and specific circumstances.
  • Costs Involved: Be aware of additional costs associated with obtaining a tax deed, such as court filing fees, publication fees, and any outstanding taxes not covered by the tax lien certificate.

  • Rights and Responsibilities: Owning a tax deed grants you certain rights, such as the ability to:
    • Collect rent from any existing tenants on the property.
    • Potentially sell the property for a profit.
    • In some cases, take full ownership of the property after a specific period (varies by location).
  • Responsibilities: As a tax deed owner, you’re responsible for:
    • Maintaining the property according to local ordinances and paying any future property taxes.

  • Risks Involved: Investing in tax deeds comes with risks, including:
    • Title Issues: There may be hidden ownership claims or liens on the property.
    • Redemption by the Owner: In some states, the original owner may have the right to redeem the property within a certain timeframe, even after a tax deed is issued.
    • Vacant Property: The property might be vacant and require repairs before it can be rented or sold.
  • Seeking Professional Guidance: Due to the legal complexities, consulting with a real estate attorney and a tax advisor is highly recommended before investing in tax deeds
  • It’s very important that you do your due diligence for tax deeds similar to tax lien certificates.