All homeowners are required to pay property taxes in each jurisdiction. Each state utilizes a process for collecting property taxes, as well as penalties for delinquent taxes owed by property owners. During a tax foreclosure, state counties may sell either full ownership of the tax deeds or sell the rights to tax liens on properties. This occurs after the tax county collectors attach a lien to the property as a result of unpaid taxes, and the property owners have been given a reasonable timeframe to pay the back taxes owed. The purchase price for property tax liens and tax deeds may be significantly lower than the value of the home, which can be a profitable investment.
Research the properties in your local counties. Before deciding to acquire an interest in property, it is important to research the property values in each county, especially if you intend to purchase homes by paying delinquent taxes.
Attend a property tax foreclosure auction. Most county governments publish their foreclosure listings online or via local newspapers. At these auctions, the starting prices begin with the amount of the back taxes owed by the homeowner plus additional fees, including interest charges and court fees. After the bidding begins, the lien is offered to the highest bidder. Alternatively, some states offer the liens to the investor who accepts the lowest interest rates attached to the liens. In these states, the amount of the lien does not change. In tax deed states, the purchasers of delinquent property taxes gain full ownership rights to the properties. In tax lien states, property investors have the opportunities to purchase the tax liens to the properties, which is the right to foreclose on the property.
Allow time for the redemption period to expire in tax lien states, which allows the property owners to pay the back taxes and redeem their properties. During this timeframe, you may not foreclose on the lien nor occupy the home. Each state establishes the timeframe for the redemption period, which may be from one to three years. If the property owner does not pay the full amount of the property taxes, including the additional fees, the tax lien holder can initiate foreclosure procedures and acquire full ownership rights to the property.
Begin establishing your ownership rights to the property, such as recording your deed in tax deed states. In these states, you are purchasing the home, and thus you acquire the deed to the home and any additional liens or encumbrances attached to the property.
- In many states, county tax collectors provide a list of the properties that will be available at public foreclosure auctions prior to the date of the auction. This may be a great time to visit the properties and determine if they are attractive investments.
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