It’s important to note that the taxes owed are superior to other liens on the property. Even the mortgage is set aside in favor of the tax sale.
Merritt Island, FL (PRWEB) July 09, 2013
A lot of people who are considering investing in the tax defaulted auction market wonder which investment is better, a tax lien or a tax deed. Ted Thomas is committed to empowering other investors by providing quality educational tools and information regarding Tax Liens on his website at TedThomas.com.
The short answer is the investor can make huge profits with both investments, said Ted Thomas.
“Each county decides what the tax sale will be, tax lien or tax deed. Some states even offer both. So an investor has to accept whatever option the county has set or choose to invest in a different area,” he said.
“This is not a bad thing nor a good in terms of the sale and the profit investors can expect to make on their investment. It’s a matter of “this is just the way it is,” Mr. Thomas said. “To find out what kind of sale a state has, check the state department of revenue website or the county’s tax department page.”
If an investor is buying at sales in several states, then the savvy multi-state investors need to know the difference in the two kinds of sales.
A Tax Lien Certificate: A tax lien means the investor buys the past due taxes on the property, not the property. The county then gives the property owner a certain amount of time to pay off the back taxes plus interest. Once the property owner pays, the county pays the investor all their money invested, plus the interest rate in that state. If defaulted property owner does not pay in the given time period, the tax lien investor can foreclose on the property and take possession of the real estate.
“It’s important to note that the property taxes owed are superior to other liens on the property. Even the mortgage is set aside in favor of the tax sale in most states. This is why you will see banks pay off the past dues taxes before a sale takes place. Sometimes a bank doesn’t do this. When that happens, the bank is usually very prompt about paying off the lien. They do not want to lose their investment,” Mr. Thomas said. Another interesting fact he says, is sometimes you might even see that bank bidding at the tax auction.
The redemption period that the county sets for tax defaulted home owners to pay the property tax varies from state to state. While the redemption clock is ticking, Mr. Thomas said the investor needs to keep an eye on future taxes, which can usually be rolled into the original purchase.
The tax certificate purchase does not mean the investor has any rights to the property.
More than 90 percent of all tax liens are redeemed by the owner.
A Tax Deed: Buying a tax deed at a sale can give the buyer immediate access, rights and title to the property. In some cases the buyer must also need to file a quiet title action. This legal procedure fully clears up the property deed and is needed to put the real estate on the market.
“In short, you are buying the property. You are not investing in the delinquent property taxes, as you would with a tax lien,” he said.
“You will need to look at the property and make sure that the property records from the county and property image are current. If the county records list that there's a house on the property and give you a property image, confirm that the property wasn't burned down since the property image was taken. If you've had any experience with Google Maps, you will know that online property images can be out of date.”
Resources for this news release were condensed and pulled from TedThomas.com. Here you will find in depth information on tax liens and tax deeds in a new guide titled "Cash Flow Generator."