Purchasing Tax Liens – Everything You Need To Know


Tax liens are actions that allow investors to purchase homes at a lower value than their real price. Although this may seem like a good way to invest, it is important to understand how the process of purchasing tax liens actually works.

A lien occurs when a home owner is unable to spend their taxes. When a property owner is sent an invoice, they are given a specific time frame in which to get their tax invoice updated. When the home owner does not meet the deadline, some counties can decide to sell the property through an auction or a tax lien. The actual process of the auction allows other people to acquire the property based on the amount of taxes, any interest that was owed and several other costs. When the home that is being sold is one of high value, the taxes may be less than those of the value of the property.

Hence, the tax liens are simply forced sales of properties where people did not update their taxes. The tax liens are not implemented in every state but there are a number of counties within some states where the liens are applied.

Tax liens can prove to be quite lucrative if you understand how they work. Once an investor invests in the tax lien, they may be entitled to one of two things. Either they will receive a yield on the lien, which allows them to charge the offending taxpayer a fee in order to release the lien or a title to the property that is issued if the taxpayer fails to pay the liens.

There are a number of reasons why people are opting for tax liens. One of the reasons is that there is a fixed percentage that must be paid back in order to hand back the lien to the offending taxpayer. The other reason is that the investor would obtain the title to the property at a good discount which is often not the case when people invest in real estate.

However, as lucrative as the tax liens look, there are some things that one should understand before investing in tax liens. The IRS and creditors will, for example be given preference in the event that the original owner of the property declares bankruptcy. This is only one scenario.

Another challenge is that although most properties will come at a bargain price, without doing the necessary research, you may find yourself in trouble. Doing inspections and research before buying property is essential to making the deal work out. This is something that buyers can sometimes overlook.

As with any investment, investing in tax liens requires knowledge and advice to make the liens profitable. It pays to make sure that to do the right research beforehand. Many banks and professional investors do this to ensure that they will not get into trouble once they invest.

Anyone who is legally allowed to own property is allowed to participate in a tax lien auction. However, you will need to ensure that you are able to pay for the property that you purchase. As with most auctions, payment will be required as cash within a certain period of time.

Tax liens are a great way to invest in property. However since most properties are sold as lots, it may be challenging to find out what kind of property an investor is purchasing. The best way to tackle this is to do research on the region and what kind of properties are up for auction. This will fool-proof your investment.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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