A tax sale is the sale of a real estate property that results when a taxpayer reaches a certain point of delinquency in their owed property tax payments. A tax lien is then placed on the property, and if the debt remains unpaid, the property may be sold at a public auction. Tax lien investing involves the purchase of these properties with the hope of earning a return on investment through subsequent resale or by collecting the delinquent taxes owed.
When a property is sold at a tax sale, the new owner takes on the responsibility of paying any outstanding taxes. In some cases, the delinquent taxpayer may still have the right to redeem the property within a specified period of time. If the back taxes are not paid during this redemption period, the new owner may then assume full ownership of the property.
It’s important to note that tax sales are generally conducted by local governments, and as such, rules and regulations can vary from one jurisdiction to the next. It’s advisable to research tax sale procedures in your area before participating in one. A tax deed sale is a sale of the property itself, and occurs when no one bids on the liens at a tax lien sale. The highest bidder at a tax deed sale takes ownership of the delinquent property. Not all states have tax deed sales, and in some cases, tax deed sales are only held if there are multiple years of unpaid taxes owed.
Even if you purchase a property at a tax deed sale, the previous owner may still owe money to the government for back taxes, and you could be responsible for paying those if they're unable to do so.
If you're interested in purchasing a property at a tax sale, it's important to do your research ahead of time. You'll need to find out what type of sale is being held, as well as the minimum bid that's required. It's also a good idea to have a loan lined up in advance, as you may need to pay for the property in cash on the day of the sale. Doing your homework ahead of time will help you avoid any surprises, and will give you the best chance of getting a great deal on a property.
There are a few things to keep in mind if you're considering tax lien investing. First, it's important to do your research and understand the process before making any decisions. There are a number of risks involved, and you'll want to make sure you know what you're getting into before putting any money down. Secondly, be prepared to pay for professional help if needed – navigating the tax sale process can be complicated, and it's worth it to have someone on your side who knows what they're doing.
Finally, remember that tax lien investing is not for everyone – but if you're willing to take on the risks, it can be a great way to earn a return on investment.
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