What Are Government Tax Lien Foreclosures?

Since the housing market came to a standstill, government tax lien foreclosures properties have become all the rage. This is mainly due to their double benefits of high returns and security.

Tax lien foreclosures are properties that are taken over by the government when a homeowner defaults his income tax, state tax or federal tax payments. The government will put up these properties for sale through an auction in order to recover the homeowner’s unpaid taxes. The taxation rules and regulations that are applicable in all states in the United States forbid the owner and/or his family members or relatives from bidding on the property during the auction. Tax lien foreclosures are hot properties at the moment mainly due to three reasons.

First, the return on investments on the property can range from 30 to 60 percent. These rates make the properties attractive investments for either first time or experienced real estate investors.

Secondly, the tax lien foreclosures are offered at unbelievable low prices. The government sells the property at the minimum price level that will cover the tax liability. This is irrespective of the true market value of the property. It is not unusual for buyers to get properties that are sold under half their market value price.

Finally, there is minimal risk in investing in tax lien foreclosures since it is the government that conducts the foreclosure. This eliminates any chances of fraud. Moreover, the properties do not carry any landowner liabilities and they are therefore more stable investments.

Before bidding on tax lien foreclosures, you should meet the legal requirements set out by the state in regard to foreclosure sales. Different states have different requirements and it would be wise to check at your local county court to ensure you satisfy the regulations. Most of the auctions are closed very quickly, usually within 24 hours, by paying for the property in cash.

To buy government tax lien foreclosures, you first have to search the properties available. This information is available at your local housing authorities or county registrar. Also, asses the quality of the title and any hidden liabilities the property may have. After getting a property you are interested in, check the background of the authority managing the sale. This may help protect you against losing your hard earned money to fraudulent individuals or companies.