What Is a Tax Lien Certificate?
A tax lien certificate is proof that an individual has purchased a property tax lien. These certificates are issued by county governments following the sale of a tax lien. Real estate owners are required to pay property taxes each year. When the owner becomes delinquent in paying the taxes, the county puts a tax lien on the property.
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Sale of Tax Liens
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One way county governments get the money they need from property taxes is to sell their rights to the tax liens at public auctions.
Tax Lien Investors
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Investors of tax liens pay the overdue property taxes. The amount ranges from $100 to more than $20,000. Once the sale is made, the investor gets a tax lien certificate.
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Interest Payments
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In exchange for paying the back property taxes, an investor is paid annual interest from 12 to 30 percent. The amount varies by state.
Redemption Period
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All real estate owners who owe back property taxes have 1 to 3 years to pay the tax lien investor the principal and the interest. This is called the redemption period and the time frame varies, depending on the state.
The Right to Foreclose
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If the real estate owner does not pay back the money during the redemption period, the tax lien investor can foreclose on the property. The investor then owns the property.
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