How to Buy Tax Liens

Tax liens are an excellent way to invest in property, if you know what you are doing. After tax liens are issued, the municipality that issues the return creates a tax lien certificate. A tax lien certificate is then auctioned off to the highest bidder. These auctions are generally one of the only ways how to buy tax liens, but it certainly isn’t the only way. It’s also possible to purchase a tax lien directly from a third-party. These third-parties purchase the lien themselves and then sell them on for a fixed price.

These tax lien auctions are held online through websites, and offline in physical settings. Investors bid down on the interest rate or bid up a premium they will pay for the lien. The investor who takes on the lowest interest rate or pays the highest premium is the one that ultimately gets the lien. Sometimes investors can get stuck in bidding wars. It’s important that you avoid them when you can. Bidding wars drive up the price of a lien, which reduces the potential return on investment. Remember the first rule of investing; buy low, sell high. There is also the potential risk of buying a property that needs repairs. Having to repair a property before you can sell it also reduces the potential return on investment. Not to mention the issue of having to deal with evicting the people currently living in the house, which could require the help for an attorney or a property manager.

Buying tax liens is a relatively simple process. Start out by going to the tax collector or county treasurer website of your county, or the county you wish to purchase a tax lien in. Or just do a quick Google search for buying tax liens in your area. Either way, you’ll end up at a website where you should be able to find a list of properties subject to sale.

From here, you can find all the properties that are tentatively up for auction. Choose a property that interests you and do due diligence on the property. Find out everything you can about the property from the website of the property appraiser. There should also be a lot of information about the property on the website that has the lien listing, including the tax information.

It’s also a good idea to contact the local zoning department. From them, you can find out if the property is indeed zoned for residential, agricultural, industrial, or commercial use; depending on which kind of property it is and what your plans for the property is. Every property your purchase at a tax lien auction is sold as-is. That’s why you need to put in all the hard work before the property goes up for auction. You need to ensure that the property is going to be worth your time and money, after all.

When you’ve settled on a property that you think is a good choice and will offer a good return on investment, it’s time to complete and mail your bidder registration form and Deed Information Sheet. These forms can be found on the website where you found the property. The county in question must have these forms on file if you want to get into the auction.

After securing your place in the auction, the only thing left to do is to attend the auction itself and make your bid. The winning bidder receives the deed from the county treasurer around four weeks after the auction is over, and then it’s up to you what you do with it. There are plenty of benefits and risks of buying tax liens, but hopefully you’ve learned a little more about how to buy tax liens with the help of this guide.

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