How Tax Sales Work
You may have seen those advertisements on the internet about real estate investing, and got you into thinking that purchasing tax lien or deed properties is as simple as it looks. It may not be that easy for beginners in the scene but making sure how it works, and understanding the process can be very profitable.
Take note that every state sells either tax deeds or liens, and even both. These are sold on a tax sale at the county level. This happens because of homeowners who do not pay their property taxes. The properties are repossessed by the government and sold to an auction in order to recover lost revenues, which are needed for public services. Now if you live in one of those tax deed states, the county is going to conduct a tax deed sale. You would be bidding against other investors on the deeds of each of those delinquent properties. If you're going to be the winning bidder, you would be able to apply for the property's deed after the redemption period expires, or receive it right away for some states. Homeowners though are still given a chance to take back their properties during the redemption period. What they must do is pay the back taxes, interest, and any penalties. If they fail, the chances of rescuing their properties are slim.
In a tax lien state, you are going to be bidding on the lien against the property. If you are the winning bidder, you would be given the tax lien certificate as proof. When the redemption period comes to an end, and the owner doesn't pay up, you can foreclose the property. Then, you can apply for the deed of the property. Take note that investing in tax lien certificates takes a very long process because of redemption periods which can last up to 2 years for some states. Patience is the key here.
Homeowners most of the time pay off their tax dues during the redemption period. The nice thing about it is that the attractive interest rates the sale offers. Interest rates as high as 18% would surely make you earn big profits as soon as the homeowners eventually pay the back taxes. This is the reason which invites most investors to bid at tax lien auctions.
Tax sales have long been a source of good profit for those investors who are looking to double their investment. Furthermore, it provides a chance for the homeowners to rescue their tax delinquent properties. So, basically it works in two ways and benefits both parties.
Take note that every state sells either tax deeds or liens, and even both. These are sold on a tax sale at the county level. This happens because of homeowners who do not pay their property taxes. The properties are repossessed by the government and sold to an auction in order to recover lost revenues, which are needed for public services. Now if you live in one of those tax deed states, the county is going to conduct a tax deed sale. You would be bidding against other investors on the deeds of each of those delinquent properties. If you're going to be the winning bidder, you would be able to apply for the property's deed after the redemption period expires, or receive it right away for some states. Homeowners though are still given a chance to take back their properties during the redemption period. What they must do is pay the back taxes, interest, and any penalties. If they fail, the chances of rescuing their properties are slim.
In a tax lien state, you are going to be bidding on the lien against the property. If you are the winning bidder, you would be given the tax lien certificate as proof. When the redemption period comes to an end, and the owner doesn't pay up, you can foreclose the property. Then, you can apply for the deed of the property. Take note that investing in tax lien certificates takes a very long process because of redemption periods which can last up to 2 years for some states. Patience is the key here.
Homeowners most of the time pay off their tax dues during the redemption period. The nice thing about it is that the attractive interest rates the sale offers. Interest rates as high as 18% would surely make you earn big profits as soon as the homeowners eventually pay the back taxes. This is the reason which invites most investors to bid at tax lien auctions.
Tax sales have long been a source of good profit for those investors who are looking to double their investment. Furthermore, it provides a chance for the homeowners to rescue their tax delinquent properties. So, basically it works in two ways and benefits both parties.
