Tax Lien Sale- Keep Looking For Parking Your Funds
One of the bigger defaults happening in the property markets is failure to pay taxes to the governments. County governments have a major share of their budgets coming from property taxes.
In case of delinquent properties, the finances of the counties are crippled and hence these counties resort to what is known as tax lien sale. Here the buyer of these liens acquires the right to collect the tax in default as well as any penal interest and other costs associated with these taxes. Tax lien sale is also known as tax certificate sale but is different from the tax deed sale. How? We will see.
In case of tax lien sale, the buyer only acquires the right in respect of taxes unpaid. However no ownership right is created in the property in question. Thus the buyer in these sales pays the unpaid taxed to the governments on behalf of the defaulter property owners and assumes the authority to recover these taxes from them. Of course the buyer also obtains the first lien on title of the property ahead of other liens and subordinate debts.
In a tax deed sale, the acquirer obtains the title deed of the property put on the block. This generally happens when even after following the due process of law, the defaulter fails to make payment of taxes and hence the county auctions his property to the successful bidder, who becomes the new owner of the property. The proceeds of such auction are adjusted against taxes due. Tax lien sale allows the bidder to acquire a right in the unpaid taxes. However what happens if these taxes are still not paid by the property owners. In such cases, the acquirer of the rights has an option to foreclose the lien on property after a specified period of time and has the complete authority to recover his dues. His lien has the first rights against the property and stand only after the government dues and claims. Tax lien sale procedures differ from county to county and hence it is advisable to go through the same before participation. Most of the counties advertise their schedule well in advance and any one can participate in these sales. The general principle followed in tax lien sale is that of buyer beware. Thus you have to get yourself satisfied about the property in question as well as other conditions associated with the sale. The government does not certify the ownership details of these properties or tax laws associated with the same. It is also possible that the property in question may be a subject matter of other litigations. Hence you are better off in a tax lien sale, if you do your homework well and consult a property attorney before bidding in the sale.
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