Government Tax Lien Certificates



Government Tax Lien Certificates

Government Tax Lien Certificates Defined

Government Tax Lien Certificates Profit Potential Realized

Government Tax Lien Certificates - When a property owner fails to pay his/her real estate property taxes. Unpaid taxes become a lien on the property. Basically, this means that the delinquent tax bill is recorded in the local governments property records, and until the taxes are paid, the tax lien remains. This creates a Tax Lien Certificate. Meanwhile, a statute mandated interest rate penalty from 15% up to 50% per year is mounting up. If the real estate property taxes remain delinquent for too long (five years or less) the property owner will risk losing the real estate.

How to Profit from Government Tax Lien Certificates

Steps to Profit from Government Tax Lien Certificates

  1. You find a property that has back taxes owed on it


  2. You purchase (for a tiny fraction of the value of the property) the tax lien (or what's sometimes called a tax lien certificate) from the government agency that owns it because they don't want to deal with waiting around to collect their money.


  3. Now one of two things will happen:
  • The owner defaults on the taxes and the property is in foreclosure, which means the property is now owned by you.

    You can turn around and sell it for less than market value and turn a nice profit, or potentially sell it at or above market and really cash in.


  • OR, the owner pays the taxes owed, plus interest, to you.

    Now you've made money (the interest) on your investment, usually at a significantly better rate than if you put the same amount in the stock market or with any other supposedly money making investment.

Rewards of Tax Liens Certificates

However, what many tax lien buyers find out is that, if they did not do proper title and bankruptcy research, their tax liens can become worthless.

For example, creditors and the IRS can take priority over tax lien holders in cases where the original owner of the property declares bankruptcy.

In addition, many people purchase properties sight unseen, going just on the description posted prior to auction. Without actual inspections and geographical surveys, sometimes these deeds are worth little more than the paper they're printed on.

Yet institutions, like banks and credit unions, have always been able to overcome many of these conditions. Because they had the resources to build relationships with local real estate agents, do the proper title searches and property inspections.

These firms realized the potential in tax liens, provided they do the"due diligence" and ensure each tax lien purchase was a sound one.

Individual tax lien purchasers are often burned without doing full inspections of each property they purchase. At auction, tax liens are usually issued based on lot number. Purchasers have no idea whether they're buying a three bedroom house or a plot of dirt without inspecting the property. Physical inspections take time, energy and money, and often limits tax lien purchasers to properties within a small area.


Government Tax Lien Certificates
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