How to Buy a Tax Lien Home
Looking to get a house for a fraction of the cost? Consider investing in tax liens. When a person owes a significant amount of debt or taxes, the government can impose a tax lien on the person's house. When you buy a tax lien, you're buying the right to pay off the delinquent tax owed by a homeowner. Here's an example of a tax lien situation: A family owes a hefty amount--say $1,000--in back taxes, so the state issues a lien on their house. Instead of keeping the lien for themselves, the state can auction off the right to buy the lien on their property. You, as an investor, purchase the lien for $5,000. Now the family has a certain amount of time--usually about a year, but two to three years is also common--to pay off the past due tax plus any accrued interest to you, the person who purchased the lien.
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Instructions
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Realize the risks involved with purchasing a tax lien. You're at risk when a proper title search isn't completed and you find out that there's another lien on the property that takes priority over the tax lien.
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Check your county's website for details on purchasing a tax lien certificate. You'll need one of these certificates before you can purchase a tax lien. Some counties sell tax deeds in lieu of certificates. Always research your county's specific requirements before proceeding.
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Look in your county or city newspaper for tax lien auctions in your area.
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Preregister for the tax lien sale you're interested in.
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Find out what payment types are accepted. Payment types and regulations vary by county. Cash is the most common form of payment.
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Run title searches on the houses you are interested in purchasing the tax lien for.
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Purchase a tax lien. You'll profit from this deal either by collecting a fixed penalty from the homeowner or the property itself or, in about 25 percent of instances, gaining ownership of the family's house. You gain ownership of the property when the original homeowner fails to pay the taxes or interest that he owes.
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References
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