subject: Profit From Purchasing Tax Liens [print this page] The taxes collected by the government from the residential and commercial properties are called tax liens and they are used for road repair, pay law enforcements or any programs funded by the county. And if you are still on your mortgage, there is a part of payment where it goes to property taxes each year. But some property owner would choose to pay for it separately especially if theyre already done paying for their mortgage, so they should be accountable for the yearly tax payment.
Each county are getting these tax notices each year and for those who fail to pay their taxes will be considered a delinquent taxpayer. This will give the government the right to set a lien against your property and lien certificate will be put up for sale. The highest bidder in turn will have to pay for the unpaid taxes and will be given authority to collect payment including the interest or penalty only. This means purchasing tax liens will give the right to collect the owed taxes only but they won't really have anything to do or they have no rights when it comes to the property itself.
When purchasing tax liens certificate, it is essential for you to understand how the system works before you go and make the bid in any auction. Sale on tax lien properties normally requires a deposit of ten percent in the form of a certified check. So when some bidders will want to get their tax lien certificate, they will receive it by mail. However, these policies vary from state to state or county.
The owner will have to pay it at a certain time plus the interest accrued to the certificate holder. It is also vital for the investors who are purchasing tax liens to know if there is a chance of owning the property. Some state allows the lien certificate holder to foreclose the property if the owner will not be able to pay until the redemption period, so this will give them an opportunity to claim full ownership of the property.
However, you will have to expect that most homeowners will try avoid from having their property foreclosed so they will do everything they can to raise funds to pay their taxes. So there is a higher rate for these loans being paid. In which case, this will still be a win-win situation for the investors. If the loan will end up being paid, they will have the full amount they invested plus the interest set by the government at the time of the lien certificate auction. If not, they can have the property. And these make purchasing tax liens profitable and a good strategy for real estate investors who want to own a property at a fraction of their worth.
So if you want to consider this type of investment, you need to make sure that you have made your research and preparation before you enter the tax lien auction. You may as well attend the actual bidding so you can properly observe and ask the other investors on how the system works. They can exchange ideas and give you some pointers on what to do and what to avoid.
You may also ask other real estate tax lien professionals you know or attend seminars, or search more information online to give you detailed tips when purchasing tax liens and how it will benefit you. Just make sure you understand the pros and cons before you go into the real auction or invest in real estate.
