tax lien auctions, tax deed sales

Tax Liens are Sold to Investors at Tax Lien Auctions

Written by: Stephanie Thompson

A Tax Lien Auction Results from Upaid Property Taxes
There are times when a property owner is unable to pay the required property tax. At such a time they become a delinquent taxpayer and the appropriate governing authority is in charge for collecting property taxes. This collection can be achieved by a property tax auction. That brings us to the question what is a tax lien auction? A tax lien auction is a court-ordered auction. Depending upon the state and the nature of sales it can be an auction for tax deed sales or tax lien certificates.

A Tax Lien Auction and a Tax Deed Auction are not the Same
In case of an auction for the tax deed, the property is sold to satisfy the existing delinquent taxes. An auction of the tax lien certificate involves selling a certificate to claim the total sum of taxes owed and any administrative charges and interest on the amount owed.

Investors Purchase Tax Liens and Deeds at Tax Lien Auctions
The definition of a lien is: a claim against an item by another party, which utilizes that item as security for repayment of a loan or other claim. A tax lien is placed on a piece of property by the government when the owner fails to pay their property taxes. Now here is where the investor comes it… the government sells these liens at county auctions to investors. The investor who wins acquires a first position lien on the property. Then, the property owner has a fixed period of time to pay off the principle and all interest and/or penalties accrued-ALL of which goes to the investor.

A court-appointed referee carries out the auction. At the beginning of the auction, the referee announce the terms of the sale, the required deposit to be made at the auction. Usually, you are required to pay 10% in form of a certified check which are payable to the referee.

Tax Lien Auctions Allow Limited Opportunity to View the Tax Property
Remember, the properties sold in these auctions are sold "AS IS, WHERE IS, WITH ALL FAULTS." Even if a property is under a tax lien foreclosure, you do not get right to enter the property for an inspection. You are required to place your bid accounting this uncertainty. You should investigate the property as best you can, but you cannot inspect the interior prior to the sale.

Tax Liens Can Result from more than Unpaid Property Taxes
Delinquent charges can arise if the owner has not paid property taxes, sewer or water charges, surcharges, sidewalk repairs, or vacant lot cleaning charges and other property-related municipal fees and charges. To attend to such delinquency, all 50 states offer different schemes. Some state offer public auctions against such properties in form of a tax deed or tax lien certificate.

Delinquent Tax Sales: A Sound Investment Strategy

Investors can stand to make great gains on delinquent tax sales. Interested parties are allowed to purchase, via auctions, the outstanding liens.


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