Q. What is A Tax Lien Certificate?
A. Tax Lien Certificate If you own a property you have to pay Property Taxes (Council Tax is the UK equivalent) to the county that the property resides in. If a property owner goes through a bad financial spell and does not pay the property taxes, the taxes do not go away. They continue to be due and will mount up until someone pays them. The county relies on property taxes for revenue to pay for schools, county improvements and other public services. If a property owner does not pay his/her taxes then the county has the right to place a tax lien (legal charge) against the property and sell the lien to an investor as a way to recover the taxes due.
Q. How much interest does a tax lien pay?
A. When you purchase property Tax Certificates, you are guaranteed a fixed return on your investment. In fact, if you choose to purchase your tax-defaulted paper from a particular state, your return may be as high as 50%. Although most states pay less than 50%, your investment is always secured with real property. So, as long as due diligence is a major part of your process, your investment is never at risk.
Q. Are there any risks associated with tax lien investing?
A. It is important to remember the element of risk involved in the purchase of tax liens. If you purchase lien properties under the control of the Federal Deposit Insurance Corporation (FDIC) and those affected by the Drug Enforcement Administration (DEA) could possibly result in the loss of your investment. Our training course will teach you how to conduct your own investigation and reduce the possibility of loss.
Q. Will the Government allow me to deduct the travel cost if I go out of state to purchase tax lien certificates?
A. If you start a Tax Lien Investing business, the U.S. Government will allow you to write off a number of home office business expenses.
Q. What is a Tax Sale?
A. The legal process of selling property for the unpaid taxes is commonly called “Tax Sale” or “Tax Auction”. Regardless to the name given, the sale is held at a time, place and location ordered by the Court and it is a public auction.
Q. How can I learn about public tax lien auctions?
A. For new investors we would highly recommend you attend a webinar or a mini live training. Please see our calendar for upcoming training.
Q. Will I get my money back if the property is redeemed?
A. If property is redeemed, the purchaser will receive his or her purchase money back (ie: amount paid at tax sale) plus interest on the tax lien certificate based on the price paid at the tax sale.
Q. Which county sells the most tax liens?
Arizona’s Maricopa county is the largest U.S. county that sell Tax Certificates. The Maricopa county recorder, county assessor, and county treasurer have excellent online resources for researching tax lien properties.
Q. If I purchase a Tax Lien Certificate, do I own the property?
A. No. You own a note on the property, for a specified redemption period, and earn interest for each month the note remains outstanding. At the end of the redemption period you may request the deed to the property. The buyer has no legal claim or obligations during the redemption period.
Q. How do I collect my interest payments?
A. If the property owner pays the government the outstanding taxes due before the certificate reaches maturity, the government will send to you your initial investment along with all outstanding interest due.
Q. What happens if the property owner does not pay?
A. If you find yourself in that situation, you will have hit the lottery. The government will give you the deed to the underlying property, Free-and-clear. Tax Certificates are senior to all other mortgages and liens (including Federal tax liens). This means you could realize a ROI of 10,000% or higher.
Q. Once it is determined that I own the property, how do I take possession of it?
A. To insure that everything is in proper order, you should contact a Real Estate Attorney in the state where the property is locate and get his/her assistance. The Attorney will insure that the title is cleared and all required notifications are sent to interested parties.
Q. Are the Tax Lien Certificate profits considered taxable income?
A. One of the biggest challenges facing all investors is keeping the profits generated by their investments. There are ways of deferring tax and this will be explained in the training.
Q. I am a housewife, and my husband is desperate for us to have more income. Would investing in Tax Lien Certificates help us?
A. Yes, it would. Over twelve percent of our students are housewives and they are contributing significantly to the families’ financial security.
Q. Will I get clear title to the property?
A. No, while the Tax Deed gives you ownership, it does not guarantee clear and marketable title. To obtain marketable title, you may file for a “Quiet Title Action” in the civil court system. Anticipate a quiet title suit to cost anywhere from $800 to $1500 and to require the services of a qualified real estate attorney. The suit generally takes about 60 to 90 days to complete. Upon completion, you will have clear title to the property. The purpose of the suit is to do just what it says – “quiet the title”. All lienholders that have an interest in that property (i.e. mortgage holders, judgment holders, IRS, state liens) will be served and notified through the suit. Typically, you would be responsible for all government municipal liens. (i.e. county, city, state, and federal). But, each case is different. Always consult with a real estate attorney for advice on liens that may or may not attach.
Q. What happens with most of these properties?
A. Most of the time, the certificates are redeemed prior to sale. This means that the owner pays the taxes current to prevent the property from going to sale.
Q. What liens or encumbrances survive against a property after it is sold at a tax deed sale?
A. Governmental liens and judgments survive the issuance of a tax deed sale and are satisfied to the fullest extent possible with any overbid monies from the sale. Governmental liens not satisfied in full, survive and remain against the property. By researching the Ownership and Encumbrance Report filed in each tax deed file will reveal any liens. The Clerks office is not responsible for any discrepancies or omissions on the report. Should you have any questions concerning what liens and judgments survive the tax deed sale, consult an attorney, we cannot advise you.
Q. Can the property owner stop the sale of the property?
A. The owner or mortgage company can “redeem” the property from the tax deed sale by paying the amounts owed to the Tax Collector and Clerk of Circuit Court. The tax deed clerk will make every effort to keep this list updated for any last minute redemptions.
Q. How is the base bid determined?
A. If the property is not homestead, the opening bid is the total of unpaid taxes that are delinquent or became due prior to tax deed application, interest, and the administration fees of the Tax Collector and fees of the Clerk of Circuit Court (Fl Dept of Rev. 12D-13.063 paragraph 3). If the property is homestead, half of the assessed value from the tax roll is added to the above amounts.
Q. If I am the highest bidder at the sale, what do I need to do?
You are required to remain until the auction is complete and then come into the clerks office. You will be given a slip with the exact figures, including the amount for recording and documentary stamps as this is also an additional cost that the successful bidder is responsible for. You will also fill out a form with the correct name/names and address to be placed on the deed. The amount due must be brought back to the Clerks office within 24 hours, being paid in cash or cashiers check.
Q. What if I am the highest bidder and fail to return with payment or choose not to purchase the property for any reason?
A. If full payment is not made within 24 hours (either in cash or cashiers check) your deposit will be forfeited. If you are the highest bidder and you do not honor your bid for any reason, you may be barred from bidding at future tax deed sales.
Q. If I am the successful bidder, can I take immediate possession?
A. This will vary from state to state. The grantee of any tax deed shall be entitled to the immediate possession of the lands described in the deed upon payment of successful bid amount. However, it is possible you will have to take legal action to get possession of the property. Until possession is granted by the Court, you may not have access to the property; without permission of the prior owner. The Clerk’s Office assumes no responsibility for the availability of any property offered for sale. When considering tax deed properties, please be advised that ALL PROPERTIES ARE SOLD BUYER BEWARE.
Q. How long does the property owner have to “redeem” the property?
A. The property owner may redeem the property until the time the successful bidder renders payment AND a tax deed is recorded or issued. All current and delinquent taxes and other costs associated with the tax deed sale must be paid in full to the County Tax Collector by cash, cashier’s check or money order.
Q. What if I need additional information regarding a tax deed sale?
A. The Property Appraiser’s office can provide you with information on any structural improvements on the property. Additional information is provided in the tax deed file, which can be viewed via the clerk’s website. The laws governing tax deed sales should be studied thoroughly when purchasing tax deed properties.
Q. What happens if the property is Homestead property?
A. If the property is assessed on the latest tax roll as homestead property, the opening bid will be increased to one-half of the assessed value of the property as listed on the current year’s tax roll. If there are no bids higher than the opening bid, the land will be sold to the applicant provided that one-half of the assessed value is made. If there are bids higher than the opening bid, the land shall be sold to the highest bidder, provided that payment of one-half of the assessed value is made. If the applicant is not the successful bidder all monies will be refunded to the applicant. A title holder of record of the property shall have the right to redeem the property prior to the sale date by making payment to the Tax Collector. Upon payment, the Tax Collector shall post all records to indicate that an Application for Tax Deed has been redeemed. The Collector shall refund to the applicant all funds received for the redemption of the Tax Deed Application as soon as possible.
Q. If I am the highest bidder at a sale, how long do I have to pay for the property?
A. If you are the successful bidder for property at a tax deed sale, full payment must be received by the Clerk’s Office within 24 hours of the sale. Accepted forms of payment are cash and cashier’s checks.
Q. What does it mean for an owner to redeem a tax deed property?
A. To redeem a tax deed property means that the owner pays all current and delinquent taxes to the Tax Collector’s Office and the property will no longer be going to sale.
Q. What if my question was not answered on this page?
A. If you attend a webinar or a live mini training we will be happy to answer further questions. You will also receive a complimentary telephone consultation. This service is very popular with our clients.