How to Acquire Property Based on Past Due Real Estate Taxes

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When a homeowner fails to pay property tax, the county where the property is located has the right to foreclose on the property. As a potential buyer of a property or buying a home that has been foreclosed upon because of back taxes, it may be a way to acquire property based on past due real estate taxes rather than the value of the home. Before you buy a property based on past due real estate taxes, learn how tax sales work, what your rights are and what you have to do to make it a successful purchase and real estate investment.

  • Do a title search. A title search reveals any ownership rights to the property including liens or mortgages other than the tax lien currently on the property. Doing a title search can help you ascertain whether there are any potential businesses or individuals that have rights to the property other than the current homeowner.

  • Find out state real estate laws. Each state has different real estate laws when it comes to buying homes by paying past due property taxes. For example, some states give the current homeowner time to pay past due taxes even after the property has been auctioned to a new buyer. Find out what your state law is because this can extend the period of time you can take ownership of the property even after you have bought it by paying the past taxes due.

  • Obtain the warranty deed. Once you pay the back taxes that are due on the property, the county tax collector's office will hand you the warranty deed for the property. The deed is proof of ownership.

  • Obtain the mortgage satisfaction letter. During the title search, you may have found that there is a mortgage lender that has a stake in the property. If this is the case, then you want to request a mortgage satisfaction letter from the lender, which is a letter that releases the existing mortgage on the property so that there are no longer any liens on the property. This ensures you hold a clear title on the property.

Tips & Warnings

  • Past due property tax amounts can range from a few thousand dollars to hundreds of thousands of dollars, depending on the tax situation where the property is located. If the past due tax amount reaches the prices that homes in the area are selling for, then you may want to have a professional appraisal done on the property to make sure it is worth at least the amount you are paying in back taxes.

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