Out of State Tax Liens: What you Need to Know Before you Bid

6/17/2025 12:00:00 AM

Investing in tax liens outside your home state can be a smart move-especially if you're looking for better returns, more inventory, or simply diversifying your portfolio. But before you jump into another state's auction, it's important to know exactly what you're getting into.

Every state-and sometimes every county-has its own set of rules, timelines, and quirks when it comes to tax liens. What works in your home state might not apply somewhere else, so doing your homework is key.

1. Redemption Periods Vary (A Lot)

One of the biggest differences between states is the redemption period-how long the property owner has to pay back the taxes (plus interest) before you can start the foreclosure process. Some states give owners just a few months, while others offer up to three years or more. That impacts your cash flow, risk, and how quickly you can turn a profit. So always check the local redemption rules before you bid.

2. Foreclosure Processes Aren't One-Size-Fits-All

The road to foreclosure also looks different depending on where you're investing. Some states have a judicial foreclosure process, meaning you'll need to go through the courts. Others are non-judicial, which can be faster but still require you to follow very specific procedures. Knowing the legal steps ahead of time helps you plan accordingly and avoid delays.

3. Remote Research Is a Must

If you can't drive by the property, you'll need to get good at online assessments. Use tools like Google Maps, Zillow, and local property appraiser or assessor websites. Some counties also provide GIS (Geographic Information Systems) that let you see property boundaries, structures, and even zoning data. A little extra research upfront can save you from bidding on a property that's burned down or landlocked.

4. Stay Compliant with Local Rules

Each county may have different requirements for bidders-especially if you're an out-of-state investor. You might need to register ahead of time, use a local address, or appoint someone to represent you legally. And don't forget about deadlines-miss one and your lien could be invalidated. Always read the auction rules carefully and, if possible, talk to someone at the tax collector's office for clarification.

5. Consider a Local Contact

If you're serious about investing in another state, having someone local-whether it's a partner, agent, or attorney-can make things much smoother. They can check out properties in person, handle paperwork, or guide you through unfamiliar legal steps.

6. Don't Forget About Tax Implications

Each state has different rules for how your tax lien profits are reported-and how they're taxed. Make sure you understand how this fits into your overall tax strategy and consult with a CPA who's familiar with multi-state investing.

Out-of-state tax lien investing can open up a world of opportunity, but it's not something you want to rush into blindly. Understand the rules, do your research, and be prepared to operate like a local-even if you're bidding from miles away. With the right preparation, crossing state lines could be one of the smartest plays in your investment strategy.

This blog post is for informational purposes only and should not be relied upon as financial or investment advice. Real estate investments carry risk and individual results will vary. Always consult with your team of professionals before making investment decisions. The authors and distributors of this material are not liable for any losses or damages that may occur as a result of relying on this information.