What is the Property Tax Lien Process?
Property taxes are due each year on any real estate a person owns. When the property owner fails to pay the taxes and becomes delinquent, the county government places a tax lien on the property. The lien gives the county certain rights to the property, which it can then pass on to others.
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Recouping Lost Revenue
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The money from property taxes pays for many social and community programs. To recoup the lost revenue, county governments auction their rights to the tax liens.
Public Auction
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Each county government has a different process, but basically investors are allowed to bid on the tax liens for that year. The price can range from $200 up to $25,000 or more. The investor then gets a tax lien certificate as proof that he purchased the rights to the lien.
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Paying Interest
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In exchange for paying the back property taxes the investor gets an annual rate of interest ranging from 12 to 30 percent. The rate varies with each state.
Redemption Period
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The owner of the property has between one and three years to repay the investor the principal and interest. This is called the redemption period. The time frame varies with each state.
Foreclosure
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If the property owner does not repay the money during the redemption period, the investor can foreclose on the property. The investor is now the legal owner of the property.
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