Tax Lien Sales

Investment Tool For Exeptional Deals


Tax Lien Sales

First off, what is a tax lien? A tax lien is placed on a property when the owner neglects to pay the property taxes. As time goes on, interest accumulates on these debts outstanding, and if these taxes are not paid off within after a specified time, usually sometime between 6 months and 2 years depending on state law, the lien can then be auctioned off to the highest bidder.


This buyer now has the right to collect the entire outstanding lien from the homeowner. If the homeowner can’t pay the off liens, the new lien holder can foreclose on the property.

Please note that at this point, the lien owner only has rights to the unpaid property taxes plus the interest, not the actual property per se. The actual homeowner still has the chance to pay the back taxes owed on it, but if they do not do so, ownership of the property is transferred to the lien holder.


A tax deed sale however, is when the property is auctioned off as a whole - unpaid taxes and all. Usually these properties are owned by a city local government who acquires it through a long series of legal steps, and are sold in order for the government to get some money recover money from a delinquent homeowner.


Once the property is acquired, there is always a risk of unseen problems with the house that can spell trouble for the investor. In many cases, properties that are sold through tax deed sales also have other liens placed on them, which brings about questions of legal ownership with the property. The most common examples include property tax liens, IRS liens, and bank liens. Any question regarding ownership can potentially be lethal to difficult for the average investor looking to make some additional income.


A title company will do a pre-sale assessment of the property and be sure that it has a clean background and title. If a house is sold that has no legal right to be sold, the sale is not legitimate, regardless of whether or not it was paid for. For this reason, it is imperative that a buyer purchase title insurance so they are protected in the event that a seller was not entirely honest and forthcoming. Title insurance is usually offered at the time of signing and closing escrow, and is used to help protect the buyer from legal issues and liabilities that may arise from a bad deal. Any concerns regarding one’s full ownership of the property can, at worst, end up costing the property entirely.


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