What is a Tax Lien?
Far too often, especially while we are in this bad financial mess and so many individuals
are without a job or not getting enough hours, a home owner is not capable of paying the necessary real estate
property taxes. At times like this they fall behind in paying their real estate property taxes and develop into a
Counties are normally the suitable governing authority that's in control of gathering property taxes. If an
individual cannot pay his property taxes, the collection of property taxes is commonly achieved through a tax
That brings us to the question, What is a Tax Lien sale? Tax liens are government claims for unpaid taxes
against a property. To put it in simple terms, when a real estate property owner doesn't pay her property tax that
he's liable for, the government can place a lien on the property for unpaid taxes. This will occur on the federal,
state or county level, but depends on if the real estate property is in a tax deed or tax lien state.
The system works on the basic premise that real estate property taxes are secured by the actual property.
It means whenever there is a default in payment of taxes on that property, the suitable tax governing authority has
the rights to place a lien on the property.
All fifty states in the U.S. set a real property tax. While the particular laws differ, some states allow the
tax lien to be changed into a first lien on the real estate. This lien is put on the market to be sold at public
sale as a tax lien certificate. If you have offered a winning bid, then you'll be assured of one or two sure
things: A a good rate of return and penalties as decided by the state that the delinquent taxpayer is required to
pay, or the title to the property in case the delinquent taxpayer fails to pay up inside a stipulated time set by
You should purchase tax lien at auctions held by the taxing authority, that are generally held once a year.
Generally, not all Tax Liens are offered at the auction. This might both due to lack of bidding or as a result of
there have been no acceptable bids. In such a scenario, the Tax Lien may be offered for
sale over the counter at a later date.
In many counties you don't even need to attend the auction to make a purchase. You can now purchase a Tax Lien
over the net or U.S. mail. However, it is strongly recommended that you purchase them in person over the counter to
Shopping for tax liens is a really well hidden investing secret. Many people are not aware of the profit
potential of these investments. Depending on the state where you purchase the tax lien you may earn 12% to 24% or
more per year. And if the delinquent taxpayer doesn't follow through on repayment, you still have the court in
charge of foreclosing on the property. As a result, purchasing a tax lien allows you to have either the high rate
of return from paying back the taxes or the real title to real estate at a considerable discount.
Nonetheless, prior to jumping into this type of investment, it is advised that you simply do all the required
homework. You can get other data from your tax assessor's foreclosure lists.