What You Need to Know Before You Purchase Tax Lien Certificates

Banks are the biggest investors on tax lien certificates. This only proves how safe and highly lucrative an investment can be. Every year, millions of American citizens fail to pay their property taxes. The government then generates tax lien certificates for sale to continuously fund community functions. At the same time, they allow investors to buy bad debts to give time to homeowners in paying their overdue property tax. But one cannot invest without completely understanding the process and rules behind it. So here’s what you need to know before purchasing:

Who issues the certificates and where can I get them?

In the USA, there are 3,300 counties and over 1,400 municipalities. These counties and municipalities, which are sometimes called districts, are all tax entities. The local government makes the list of delinquent property owners. You, as a citizen, can actually request the list directly from your local government office. Oftentimes, they publish it in newspapers. And with today’s modern computer-age, the list can also be searched on the internet. Through these sources, investors are informed and given a chance to purchase tax lien certificates online or through auctions.

How can I benefit from tax lien certificates?

Half of the counties in America issue home liens in the amount of back taxes. When you buy, you also help fund the daily activities of police, hospitals, fire departments, and other community functions. In return, the government helps you multiply your investment risk free by returning your investment with interests of up to 36%. For example, if you purchase a certificate from Arizona, you get your money back within the redemption period plus 16 percent interest. Also, there is a guaranteed return of your investment since almost 97% of property owners pay their delinquent tax in 24 months or less. That’s helping the community and earning at the same time.

What if the homeowner doesn’t pay the debt?

There are times when the property owner disregards the property. Although it seldom happens, the government remedies the situation through generating a tax deed. After the redemption period and the back tax are still not paid, the purchaser of the tax lien certificate is given or can apply for a tax deed. This gives the holder of the certificate the right to ownership to keep the property or sell it.

You now know that each tax lien is backed by the real estate so you can never lose your money. The local government also holds auctions so anyone can take advantage of tax deeds for sale. The majority of these auctions are based on a public oral bid system. If you win at these auctions, the property will become yours.

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