Tax Liens… What Exactly Are They?

If your still a little bit confused on Tax Liens, and how they can benefit you, I totally get that. All these different things can get confusing at times.

Let me take a brief second and break it down for you.

Tax Liens are liens imposed by law upon a property to secure the payment of taxes, and are most commonly placed on a property because of delinquent, or unpaid taxes.

So, essentially a county needs to get money to pay for everything (Roads, Schools, Medical Services) and one of their main sources of that is the taxes payed by the homeowners to the county.

When the homeowner can’t pay those taxes, a lien is placed on that property.

The cool thing about Tax Liens, is that they are the #1 priority Lien on a property. (For MOST cases this is true.It’s always beneficial to double check with the county your looking to invest in.)

This means once purchased by you, it wipes out the other liens on the property. (Mortgage, Liens from Plumbers, Electricians etc.)

Now, once you purchase a lien from the county sale, it doesn’t necessarily mean you have access to the property. Each county sets a time period for that Lien to be redeemed by the homeowner.

It varies by state, but it could be from 1 year to 3 years.

BUT, there are penalties that the homeowner must pay if they wait the full 3 years.

Even if the property redeems 5 minutes after the Tax Sale, you get your minimum penalty fee (They pay you!) of whatever percentage is set by that state. (Could be 8% all the way up to 36%)

Confused yet? I hope not!

Here is the simple version.

You buy a Tax Lien. Homeowner now has to pay you back the taxes YOU payed to the county,, PLUS an additional percentage secured by the state, if they want to get their property back into their hands.

If they don’t pay you back plus the extra, in the time granted by the state, you can foreclose on their property and own it FREE AND CLEAR.

Pretty neat stuff huh?

I think it beats out the 1-3% the banks are giving you. (In fact, the banks invest in Tax Liens with YOUR money, and reap all the rewards.)

Now, it is a good idea to know what your doing before you start buying up all the Tax Liens, so be prepared to do some research. You definitely want to walk into this with some knowledge of it.

Remember. Due Diligence is KEY.

I hope this was helpful for you.

Thanks so much for reading today’s post – I’d love to hear your thoughts, so comment below with wisdom you took out of this, and share this if you think someone could benefit from it!