How do tax lien auctions work?

You might have known that there are many ways to purchase tax liens. One of these is through buying it in auction. Tax lien certificates are legal proofs that an investor has actually purchased a tax lien by paying off the property tax owed by the owner. This happens when there are delinquent property taxes against any form of real estate. County governments actually have the right to auction off these tax liens for increasing their capital in the area.

This is the reason why tax lien investing has already become famous as there are many infomercials presenting the benefits of tax liens such as the possibility of acquiring a property at a very small price. Yes, it can be a lucrative investment but once you have mastered and understood what it really is all about, you will realize that tax lien investing can give you more profit.

  • How to make money

There are actually two main benefits when you invest in a tax lien. First is that you will get an interest on the money you’ve invested. You don’t have to do anything; your money will grow as the time passes. Tax liens usually begin when an owner fails to pay his property taxes. Since the government has obviously lost its revenue, it will issue tax liens on the property. Thus, counties may give individuals, firms and companies to purchase the rights of local governments in tax delinquent property.

These liens are then offered in public auctions. Taxes can range from as low as $100 to $30,000 or

more. So, investing comes when an investor decides to pay the back taxes in lieu of the owner. The investor will then get a tax lien certificate which entitles him to get annual interest on the money he had invested. Though interests may differ from one state to another, owners are given a redemption period to pay the investor in whole including the interest. On the other hand, if the owner fails to pay during the redemption period, the investor has the right to foreclose the property.

  • The Business of the foreclosure

In some cases, investors don’t get paid of the principal as well as the interest. After the redemption period, he can already start the process of foreclosure. Some states can allow investors to be reimbursed for the costs like filing fees. Still, the owner will be notified if he is interested in paying back the debts. If he does not respond, then the process will be continued and the investor will now have the right to own the property free and clear.

According to experts, tax liens are generally less than 10% of the total market value of properties. So, if the properties will be yours through tax lien certificates, you surely had a good deal. There is a great profit awaiting you. If the investor assumes the ownership of the property, he can do several things. He can either sell the house or use.

See, tax lien investing has more benefits that what you’ve expected. Start now and educate yourself for a better investing experience.


Category: Taxes

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