Government Tax Lien Certificates
When property taxes are not paid by the owner, they may become delinquent. Once delinquent, the Government agency responsible for collecting property taxes has the authority to force collection on those taxes. This is most commonly referred to as a "tax sale" or "tax auction". Each of the 50 states have thier own laws governing the procedure to collect on deliquent taxes. In most cases the local county government is responsible for this process, as property taxes are generally collected for the use or improvement of local communities.
Tax Lien Certificates have a face value (minimum bid) of taxes owed, plus administrative charges and interest. Depending on the laws in that area, the Tax Lien Certificate will either be sold at that amount or can be bidded up. Tax Lien Certificates may also be bid on by interest rate. The person willing to take the lowest amount of interest on the Tax Lien Certificate is the succesful bidder. Once the Tax Lien Certificate is sold, the owner of the property must repay the amount of the lien plus interest charges, usually 16-18%, back to the owner of the Tax Lien Certificate. Failure to do so within this set redemption period time can result in the investor of the Tax Lien Certificate foreclosing on the lien and potentially being issued a deed to the property. So basically, with Tax Lien Certificates, you are making the lien payment for the property owner. In return, the investment brings a high percentage of interest, and the possibility of a deed to the property.
Benefits of Investing in Tax Lien Certificates
- You get paid Interest while holding the Tax Lien Certificate, usually in the area of 16-18%.
- You have the real estate as security for your investment in Tax Lien Certificates, which are also backed by the government.
- If the property owner fails to pay within the redemption period, you can foreclose on the property and be issued a deed.
Maricopa County, Arizona Tax Auction Stats
- In 2004, a total of 14,065 Tax Lien Certificates were sold for an average of $ 1,244.00.
- In 2003, a total of 14,156 Tax Lien Certificates were sold for an average of $ 1,114.00.
Tax Lien Certificates by State
Notice: Some of the following states have statutes in place to allow for the sale of Tax Lien Certificates, but may or may not conduct sales. These states are California, Massachusetts, New Hampshire, Ohio, and New York.
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