So you are interested in investing in real estate and thinking about purchasing a tax defaulted property at a government tax sale? Well, here’s the deal. What you need to know is the difference between a tax deed sale and a tax lien sale. Once you have an idea about the types of government tax sales, you’ll be on your way to making a smart high -return investment.
The first type of government tax sale is the tax deed sale which is a forced sale controlled by a government agency for defaulted tax payments. When taxes are considered delinquent for a specified time period, the government steps in and gives notice to the property owner. The real estate is then sold at a public auction to the highest bidder in attendance. The auction is started with a minimum bid which is the amount of the back taxes, plus any interest.
The second type of tax sale is the purchasing of a tax lien certificate on an owners property for nonpayment of taxes. This kind of tax sale is where you purchase the lien held on the owner’s real estate. The winning bidder at the auction has not purchased the deed, but instead pays the delinquent taxes the owner has fallen behind on. If the owner fails to pay his debt or lien, the investor can initiate a tax foreclosure or deed sale in order to get their return on investment.
There are only certain states that offer the sale of tax liens. The best advise anyone could give is to research the states rules and guidlines on tax sales. Once you have examined your state laws, you will be ready to bid on a winning investment!
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