How to Buy Tax Liens

Investing in tax liens may generate high returns.

A housing authority may place a tax lien on a real estate property whose owner fails to pay the property tax by the due date. After a certain time, which varies depending on state laws, the housing authority sells the tax lien in an auction. If you buy a tax lien, the homeowner is obligated to pay you the delinquent amount, plus interest. If he doesn't pay, you can file a lawsuit to obtain ownership of the property. To invest in tax liens, you have to buy them at public auctions.

Instructions

1. Contact your property tax enforcement authority to obtain details about tax lien auctions. Ask about the dates and times of auctions, how you can take part and the parcels available in the next auction. Also ask about the owner of the property, the property value and the tax lien amount. Depending on your tax authority, the information may also be advertised in the newspaper.

2. Register with the property tax enforcement authority as a bidder for the tax lien auction. You may have to provide personal details, such as your name and contact details. You may also have to place a money deposit at registration. Depending on your tax authority, you may be able to register in person, by mail or online.

3. Research the properties in the tax lien sale. Your tax authority may have a database containing tax lien parcel information. The records may also detail the notices and payments related to the parcel. Bankrate.com recommends that you visit each property to check that it does not have any obvious major defects. For example, the house may have burned down or a flood may have damaged the property.

4. Attend the auction and place a bid on the parcel you want. Depending on your tax authority, you may have to bid online, by mail or in person. You may have to include your name and contact details in your bid. If you win the auction, the tax authority will notify you and send you a bill that you have to pay by a certain date.

5. Pay the amount of the winning bid by the due date set by the tax authority. If you fail to do this, the tax authority may cancel the bid, retain your deposit and resell the tax lien.

References

• Bankrate.com; Buying a Home in a Tax Lien Sale; G.M. Filisko; September 2008
• Maricopa County Treasurer's Office: FAQ Regarding Tax Liens
• Montgomery County, Maryland: Tax Sale Information and Procedures; June 13, 2011