Tax Foreclosures Property Information

Tax liens are a way to purchase property for a fraction of its market value price or to collect interest on the payoff if it is redeemed (most are redeemed either by the property owner or the mortgage lien holder if there is one). When property taxes are delinquent, county governments offer tax sales at public auction. When you buy a lien at a tax sale, you are paying the delinquent taxes on the property and have what is called a "tax interest" in the property even if you don't own it outright.

Deed of Possession

This happens when you take claim of a property by state law because of failure to pay just due and owing property taxes. Once the redemption period has expired (one year in many states), you can foreclose on the tax deed and the state will transfer the property to you by a property owner's deed. You then own the rights to title on the property free and clear of any and all encumbrances or liens or claims made prior to. No one can claim a right to the property at this point unless the federal government is also holding a lien. It is up to the purchaser to find out what liens are outstanding on the property prior to purchasing by doing a title search on the property.

How Tax Foreclosure Sales Work

Typically you would show up at the courthouse steps on the advertised day of sale and bid against others. If you are the highest bidder, you pay the bid amount with a cashier's check and receive a Tax Lien Deed from the sheriff's department or other government entity empowered to turn the property over to you. Once you have received this deed, you maintain a first priority lien on the property and even if a mortgage company holds ownership title to the property, they cannot sell it free and clear until they pay you off in full, with interest. Typically, interest rates are set by the state and cannot go over the statutory amount.

How an Owner or Mortgage Holder redeems Interest

An owner or mortgage holder can redeem the property by paying off in the holder of the Tax Lien or Tax Deed in full. You, as the purchaser, receive the principal paid for the lien plus any interest that has accrued in the interim.

What is the difference between a Tax Deed and a Tax Lien Sale?

Essentially, there is no difference. However, a tax lien sale is when a state or county sells the tax lien on the property to the highest bidder at auction. A tax deed is when the government sells full ownership and possession rights of the property. Both are considered investment opportunities. These property listings are put listed in the legal notices and classified sections of newspapers, and are available to the public prior to the sale taking place.

Federal Tax Liens (FTLs)

Federal tax liens have the same power as state and county property tax liens; only the federal government has priority over the state. The Internal Revenue Service has the power to record a tax lien against real and personal property owned by delinquent taxpayers as security based on income taxes owed. Once the IRS assesses liability for non-payment of income or personal taxes, a Notice of Federal Tax Lien (FTL) is filed against the taxpayer's property which generates a Notice and Demand for Payment. If the taxpayer will not or cannot pay the amount due in full within 10 days of notification, the IRS seizes the home and sells in a tax foreclosure auction much like the state and county does, on the county courthouse steps where the property is located.