State Tax Lien & Deed Sales List
Success is Knowledge: Inform Yourself of the Difference Between Tax Liens and Tax Deeds
Written by: Thomas Needles
To begin your journey into deeds, liens and wealth, you must first understand the definitions of the trade. Tax deeds and liens are indeed not the same, and which one is used varies on a state by state basis. So, what differentiates a tax lien from a tax deed? Unfortunately, we know the word "tax" all too well, but what is a lien and what is a deed? What does all of this mean to you? This guide may help.
A lien is an item that another party is claming. This item can be used as security to repay loans or even another claim. Add the word tax to it and you have an item that can be taken upon failure to pay taxes, such as a house. Property taxes are required by the government and if they are not paid, the house can be repossessed and put into foreclosure. This is no different than failing to pay multiple car payments. They both are taken back if not fully paid for. So, what does this mean for you? How does this definition mean money in your pocket? This is where you intervene. Between the owner of the property and the federal government lies your investment opportunity.
When a property owner fails to pay their taxes, the government puts a tax lien on the home. This is your opportunity to put a first position lien on the home. This is an investment on your part. The homeowner is then given a certain period of time to get the taxes on the property paid off. Does this mean your investment has gone to waste? Absolutely not! In fact, if the homeowner does this, the government sends you a check for the money you have invested PLUS any interest or penalty money accrued. It sounds like a pretty good deal, and if you take a chance and it fails, you still don't lose money! How many investments have that lack of risk? Not too many.
What happens if the property owner fails to pay the property taxes?
If the property owner doesn't pay up, you are in a very good position if you have a first position tax lien on the home. You now have the legal power to foreclose the home BEFORE the bank! The home will only cost you the back taxes that have accrued, which is minimal to the actual purchasing price. It almost makes you wonder why you would ever go through the bank in the first place.
Now, the chances of this happening aren't always spectacular, but it is a real occurrence. In today's financially decrepit society, the likelihood of your pockets bulging by participating in tax liens and deeds is very real. How many homes have you driven by that are foreclosed or for lease? The number is rising astronomically. Imagine if you were in the game, ahead of the game, and finding great success in an economy that is failing. Imagine being able to support a lifestyle for yourself and even your family that isn't possible without an investment like this.
The Tax Deed
Now that you understand the definition of tax liens and how it is relevant to you, a quick primer on tax deeds might help. A tax deed is also developed by the government due nonpayment of taxes and is issued to the winning bidder of a property, stating that the bidder now owns the home. Upon receiving a tax deed, you become the legal owner of the property free and clear. Most often, with the exclusion of certain states, tax liens and all previous financial issues become null and void by the government. Make sure that you are educated about the state, county, and city that you are bidding in, as the rules can vary when in comes to liens being waived. Arizona and New Mexico, for example, do not drop all liens if you have a tax deed, and if you do not follow the proper protocol, you can end up with a mess on your hands.
Tax deeds are also a wonderful investment and can be bid for a fraction of a home's or building's actual retail value. Make sure that you choose wisely. With today's economy, the market is blossoming with more and more options, so don't jump for the first "deal" you see. There are homes, and then there are homes and buildings with potential. This is where you will need to develop your knowledge of the market for a good deal.
Now that you know the difference between tax liens and tax deeds, the ideas of how to make money must be churning in your mind. Keep reading to gain more knowledge, and establish a solid foundation of understanding of tax liens, tax deeds and the market.
