What You Need to Know Before Buying Property with a Tax Lien

05 April 2019

You find the house of your dreams but are told by the realtor that the home comes with a property tax lien. Do you give up on that house and find one that doesn’t have a lien? Even though friends and family might suggest you move on, it’s better to have a deeper understanding of property tax liens before making a decision.

What Is a Property Tax Lien?

When homeowners have a financial setback, they often have problems making their mortgage payments. In many cases, they are also unable to pay their property taxes. When a homeowner doesn’t pay property taxes, their property becomes tax delinquent. A property tax lien prevents this property from being sold or refinanced. Depending upon the state they live in, after a certain period of time, the municipality can repossess, seize, and foreclose on the property. When this happens, the town or county that is owed the taxes issues a property-tax lien certificate against the property. The lien includes the owed taxes, penalties, and interest. Once there is a foreclosure, this certificate is then made available for sale, usually in an auction.

There are two types of sales based on unpaid property taxes.

Tax Deed Sale:

A tax deed is a legal document that transfers property ownership from the homeowner who didn’t pay the taxes and the municipal governmental entity owed the taxes. In turn, the government then has the authority to sell the property, collect the owed taxes, and transfer ownership to the purchaser. In this case, the property is sold at auction and includes unpaid taxes. Buying a foreclosed property gives you complete ownership of the property. The price may start low but is often driven up by competing bidders. Once the property is purchased by the highest bidder, it is owned clear and free of all mortgages and liens against it.

Tax Lien Sale:

In this type of sale, the lien is auctioned off to the highest bidder. It includes the interest incurred. If the liens are not paid, the new owner can foreclose on the property. Many states will utilize a tax lien sale in an attempt to get their unpaid taxes from the homeowner. They usually come with high penalty fees. The process and time period associated with tax lien sales depends upon the state where the property is located. Homeowners whose property is sold in a tax lien sale are given a period of time— a redemption period—to pay their taxes plus interest to the holder of the lien.

The owner of the lien may not end up owning the property should the homeowner pay back the taxes plus interest. However, there is an opportunity to make money from the accrued interest. Interest rates vary by state, for example:

In Florida, the maximum interest rate is 18 percent with a guaranteed minimum of 5 percent on liens redeemed early.
The Mississippi tax lien rate is 18 percent—1.5 percent per month—and must be repaid in two years.
Iowa’s interest rate is on the lower side, at 2 percent.

The interest rates and sales process are structured by local jurisdictions and are also dependent upon the auction. Be sure to check with the municipality before making decisions. Because of low interest rates and the volatile stock market, many people are looking for other ways to get a return on their investment. With more than$14 billion in unpaid property taxes, purchasing properties with liens, for some, is a viable investment opportunity.

It is important to understand what you are buying before you make an offer. When you purchase a tax lien certificate, you are not attaining ownership of a piece of property. You are purchasing the lien on the property. The delinquent homeowner still owns the property. When you buy a tax deed, you take ownership of the property in its entirety.

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Ariana Smith

I enjoy writing and I write quality guest posts on topics of my interest and passion. I have been doing this since my college days. My special interests are in health, fitness, food and following the latest trends in these areas. I am an editor at Content Rally.

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Revolving Debt Vs Installment Debt – Which Impacts your Credit Score

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"How are people making so much money trading forex?" If you're asking yourself this you're in the right place. This article will show you how to open a forex account and start trading forex stock today. So what is forex anyway? It is short for foreign exchange, the exchanging of one currency for another. Let's start with how to open a forex account. Most brokers offer a free demo account, letting you play with fake money. Use this time to learn how to make trades. This will give you a chance to see both the potential gains and losses depending on your leverage. That brings us to the next item to consider when opening your account. Leverage means betting on exchange markets using borrowed money. That borrowed money comes in the form of a loan from your broker. Leverage is usually offered in three amounts, 50:1, 100:1, and 200:1. Let's use 100:1 for our example. You would only need $1,000 in your brokerage account to trade $100,000 worth of currency. 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Lots are the smallest unit you can make trades in. A micro lot is 1000 units of your base currency. Micro lots are best for individual traders. These smaller trades also mean less risk. It all comes back to leverage. If there is a large shift in the market, you can cash out before losing more money. Orders tell your brokerage when you want to buy and sell. Setting Orders: Different brokerages offer different types of orders. Make sure to check before you count on setting up lesser-used types of orders. The three discussed here are offered by all large brokerages. Forex market orders are used to buy a currency pair at the best available price. Making a market order is as simple as choosing the trade you want to make and pushing the buy button. A market order tells your brokerage to buy at the next available price. If you want to buy when a currency hits a low price or sell when the price goes up, use a limit entry order to automate the process. You don't have to stare at your computer waiting to buy or sell at a certain price. Stop orders do the opposite. They will sell when prices go down to prevent losses and buy when prices are up to bring in some gains. Stop orders are what prevent you from losing more money than you can afford. How to Read Charts: The last topic we'll talk about before you start trading is how to read forex charts. There are several kinds of charts available to a forex trader, but the most common is the candlestick charts. Candlestick charts show more information than other types of charts. They show what price a currency opened and closed at, as well as their high and low for that period. This lets you see how much the price changed before ending at its closing price. When looking at one of these charts, the individual "candles" are colored to show gains and losses. This colored part of the candle is called the "body". If the body is green the price was higher at close than when it opened. 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What You Need to Know Before Buying Property with a Tax Lien

What Is a Property Tax Lien?

Tax Deed Sale:

Tax Lien Sale:

Discovering And Recovering From Identify Theft

Using Short-Term Loans to Help Rebuild Your Credit Score

Tags

Ariana Smith

I enjoy writing and I write quality guest posts on topics of my interest and passion. I have been doing this since my college days. My special interests are in health, fitness, food and following the latest trends in these areas. I am an editor at Content Rally.

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Revolving Debt Vs Installment Debt – Which Impacts your Credit Score

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What You Need to Know Before Buying Property with a Tax Lien

What Is a Property Tax Lien?

Tax Deed Sale:

Tax Lien Sale:

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Discovering And Recovering From Identify Theft

Using Short-Term Loans to Help Rebuild Your Credit Score

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I enjoy writing and I write quality guest posts on topics of my interest and passion. I have been doing this since my college days. My special interests are in health, fitness, food and following the latest trends in these areas. I am an editor at Content Rally.

Leave a Reply Cancel reply

Popular

Follow Us

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