State Tax Lien & Deed Sales List
Tax Lien Investing Problems
Written by: Thomas Needles
Problems that can come out of tax lien investing stem solely from a lack of research. Tax liens are an extremely reliable method of investment. When a property owner pays their due taxes, you are reimbursed plus additional interest and penalties. If they do not pay, you receive real estate. No matter which way you flip it, it is a win- win situation. However, failure conduct the proper research is where investor can get burned both legally and financially.
Taking Investment Risks with Properties in Poor Condition
Although the likelihood of acquiring property through a tax lien is minimal, this does not mean chances should be taken with decrepit properties. In fact, properties that are in the poorest condition are the most likely candidates for foreclosure. The reason for that is that the failure to pay taxes is not an oversight by the property owner, but rather by a real lack of money. This disaster could very well become your legal responsibility. If the building is not up to code, condemned or unsalvageable, it is your legal responsibility to fix it. There can be fines that can for the failure to do so. This tiny chance of real estate ownership has now become a leach that has attached itself firmly to your wallet. Avoid this hazard by researching the property and making sure that if by chance you do become its legal owner, that is a marketable piece of property.
Judicial Decision
There is another problem with tax lien investing that is avoidable when it comes to tax liens. When a property goes into foreclosure, it is legally granted to you. This is then utilized by you in some way to gain back your initial investment and hopefully much more than that. However, it is within the judge's legal power to sell the property and divide the earnings amongst previous creditors other than yourself. This means that your initial investment at the auction is not reimbursed and that you lose your money. The best way to avoid this very rare but extremely discouraging situation is to research foreclosed homes in the county. Also, speak with real estate lawyers in the areas as to the most common method of action by judges for properties that go into foreclosure with a tax lien. Due to the rarity of this judicial action, if the lawyers say they have seen it happen, it recommended that you should not touch liens in that county.
Other than these possible tax lien investing glitches in the system, which are almost completely avoidable with a little extra investigative work, tax liens are an incredible investment. The potential for a substantial income is very real, and tax lien investment is a very rewarding venture and one that you can build a financial foundation on unlike another other investment opportunity. It is highly recommended you do research before the auction to be as fully informed as possible and to prevent hasty bids that might hold one of these traps within.
