Acquiring Land via Tax Liens
Counties and municipal governments raise money to cover operating costs by assessing property taxes. If a landowner fails to pay the property tax, the local authorities can place a lien on the property. Many counties sell these property liens at auction, and in many instances, you can gain control of a property as a result of buying a tax lien. However, laws on tax sales vary from state to state, so you do not necessarily gain control of the property when you secure the tax lien.
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Instructions
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Contact your the local county courthouse, and ask for a list of tax lien properties in your area. The list may include residential and commercial buildings as well as land, so you must review the property descriptions to find a plot of land.
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Research the parcel that you are interested in buying by searching in your county's public records for information about liens on the property. Aside from the tax lien, mortgage lenders and creditors may also have placed liens on the property, in which case you cannot gain control of the land unless you settle those liens. When you have found a property that only has a tax lien, you should hire a title company to conduct a title search and ensure that no other individual or entity has an unsettled lien or ownership claim on the property.
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Submit a bid for the tax lien. Some counties accept bids directly, while others hold property tax lien auctions. Your bid must exceed the outstanding property taxes, but exact procedures on the bidding process vary from county to county.
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Take possession of the tax lien. Depending on county laws, either you or the county authorities must notify the property owner about the tax lien sale. In most instances, the property owner must pay off the property lien within a certain period of time after the tax sale.
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Foreclose on the land by filing a foreclosure notice at the local county courthouse. You can foreclose if the property owner fails to pay off the tax lien. In some states, you take legal possession of the property when you foreclose on the home. In other states, proceeds from the sale are used to settle the tax lien, but you must make a bid on the property if you wish to buy it.
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Tips & Warnings
Some counties have laws that require property owners to pay a fixed amount of interest to tax lien holders. In Douglas County, Nebraska, a property owner must pay you 14 percent interest as well as the principal balance if you hold a tax lien. In other areas, you must state how much interest you intend to charge when you buy the debt. Therefore, research local laws and buy a tax lien in a county in which repayment rules favor you rather than the property owner.
In some states, tax liens only remain active for a number of years. In Nebraska, you cannot foreclose until three years after the tax lien auction, but if you do not foreclose within three years and six months of the auction, the lien ceases to exist. In Colorado, you have up to 15 years within which to foreclose. Therefore, familiarize yourself with foreclosure rules, and do not allow the debt to expire.
