A tax lien sale is a way for the federal government to dispose of tax liens which are attached to real estate owners who have not paid their taxes. A tax lien sale is offered in the auction process format. These auctions are public events and may be done on the Internet and/or in a public building. If you are the winning party at a tax lien sale, you are offered a tax lien certificate. This certificate entitles you to the property in the event that the owner defaults and does not make the payment or payments necessary to satisfy the conditions of the tax lien.

Foreclosures By State

The owner of the property is afforded a redemption period. During this redemption period, the holder of the tax lien certificate is not permitted to contact the property owner or cause the property owner any additional stress, make threats or to begin the foreclosure process. Should any of these situations occur and can be proven, the tax lien certificate will be forfeited.

If the period of redemption lapses and the funds have not been proffered to satisfactorily pay off the debt, the tax lien certificate holder has two options, depending on the state. The tax lien certificate holder can begin the foreclosure process using the quit claim deed process or the tax deed sale process. However, during either of these foreclosure processes, the current homeowner is allowed to secure financing to satisfy this debt and will usually take advantage of utilizing this additional time to save his property and his credit from being further harmed.

Tax Lien sales are not for the weak of heart and come with some risk. Be assured that many prized properties that are under scrutiny with a tax lien are instantly researched and purchased by institutional investors with deep pockets. However, in today’s housing market, there seems to be a plethora of properties, even the big guns can’t buy all of them. If you are interested in entering the tax lien industry as an investor, do your homework, practice due diligence and understand that at any time the rightful property owner can make restitution on the debt, thus canceling any and all plans you may have for the property. Also be aware that if the property holder declares bankruptcy, this may supercede any and all rights to the property leaving the tax lien certificate holder with nothing.

Tax lien sales should be experienced prior to becoming a participant. Utilize the internet or other resources to determine when and where a tax lien sale will be occurring and attend one to determine if the tax lien sale process is right for you.