When a homeowner defaults on property taxes, the county may place a tax lien on the Read this page property. This could end in a tax sale with an investor paying the taxes to get the home. While tax sales can be profitable, they take a lot of research. However, savvy investors eager to take bigger risks may invest in tax sale properties. A financial advisor who serves your area can help you build an investing strategy around real estate.
What Does It Mean If a Property Has Delinquent Taxes?
Every year, property owners must pay their property taxes imposed by the county they live in. According to the U.S. Census Bureau, American households pay an average of $3,057 on property taxes annually. With all of the other expenses that homeowners are responsible for, it makes sense that some may find themselves in a financial bind if they can’t make this payment.
Homeowners that are unable to pay their property tax bill risk losing their property. Essentially, if the property tax bill goes unpaid, the county can sell a tax lien certificate to reimburse the government for the lost payment.
Counties auction off their tax lien certificates annually to the investors who are willing to pay the most. The county may also factor in the interest rate investors can charge the homeowner to recuperate the property tax debt.
Tax Lien Certificate Sales vs. Tax Deed Sales
Unlike tax lien certificate sales, tax deed sales come with the intention to purchase the property, not just the tax liability. The winning bidder of a tax sale inherits the rights to ownership of the property. A percentage of the sale will repay the tax debt, while the rest will go into the property’s owner’s pocket.
Some states have a redemption period that allows the original homeowner to regain ownership if they can pay off their tax debt. For states without redemption periods, the buyer will simply gain rights to the property.
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