How to Buy Government Owned Tax Lien Homes
Properties with tax liens are sold regularly throughout the United States. Rules vary by jurisdiction, but a lien generally is filed when a homeowner does not pay property taxes. Government agencies (often a city or county entity) hold public auctions and sell liens. After you purchase a tax lien, ownership of the lien is transferred from the government to you, which means that the property owner must pay you. By purchasing a lien at a discounted price, you can earn a high return on your investment when the lien is paid in full.
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Instructions
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Narrow your search parameters, as you can find tax lien sales locally, regionally, and nationally. Institutional investors like lienbaron.com and real estate attorneys can provide support, such as by increasing your purchase power and identifying local rules, though you must pay for their services.
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Determine when and how government sales are held. Depending on the location, sales might be held at a local office or online on a weekly, monthly, or annual basis. For example, New York City hosts an annual lien sale, while Miami has a monthly sale.
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Browse local papers for government advertisements. Multiple notices about the tax lien sales must be made to the general public. You also can search online listings, such as available on taxsalelists.com, westlaw.com, knowx.com, and autotrack.com.
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Evaluate the properties to assess likely risk and return on investment. Different types of properties are sold in tax lien sales, including residential homes and commercial real estate. Research thoroughly before purchasing so that you receive liens for valuable, usable properties. You can foreclose on property when the lien is unpaid, but you will have a bad investment if you foreclose on useless property (e.g., with lots of zoning requirements).
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Avoid discussing potential investments with other people because competition will increase when more people learn about great lien deals.
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Realize that different terms exist. You might receive interest rates on a tax lien certificate of 13 percent in one municipality for non-agricultural properties and 8 percent for similar properties in another municipality. Liens are subject to penalty fees, sometimes calculated on a flat or a compounded fee structure, if payment is not completed within the redemption period.
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Tips & Warnings
Buying a tax lien does not transfer title or deed to the properties. You have property rights when the lien is unpaid.
There are scams that promote get rich quick schemes using tax liens. Remember that there is no guarantee that you will receive a return. Research ownership history to see if multiple liens have been filed against properties that you want to buy.
