Texas Tax Lien Certificates

Type of Tax Sales in Texas Counties

Texas holds Tax Deed Sales in each of its 254 counties. They are most commonly referred to as “Public Oral Bid Foreclosure Auctions” or “Sheriffs Sales.”

When are the auctions held?

Each county in Texas may hold auctions at different times throughout the year.

The Tax Lien Process in Texas

Texas holds public auctions for tax defaulted properties, you are bidding on a “Purchaser’s Deed” with a “Right of Redemption” encumbrance. This gives the former owner the right to buy back the property from the investor. Even with the “Right of Redemption” Encumbrance, the investor immediately has ownership and possession rights. This means the investor can collect rents from anyone occupying the property, or choose to evict anyone occupying the property. The Redemption periods begins one the date the Purchaser’s Deed is filed for record in the County Clerk’s office.

Texas has a two-tier Right of Redemption encumbrance.

Tier 1: If the property is designated as a “Homestead” or “Agricultural Use” then the Right of Redemption period is 2 years from the date the purchaser’s (investor’s) Deed was filed.

Tier 2: If the property is designated as anything other than “Homestead” or “Agricultural Use” then the Right of Redemption period is 6 months.

For Tier 1 properties, “Homestead” or “Agricultural Use” properties, if the former owner redeems their property, the following table shows the scheduled rate of return (all Yields are approximated).

Months Held	Approx. Yield	Months Held	Approx. Yield
1 Month	300%	13 Months	46%
2 Months	150%	14 Months	43%
3 Months	100%	15 Months	40%
4 Months	75%	16 Months	38%
5 Months	60%	17 Months	34%
6 Months	50%	18 Months	32%
7 Months	43%	19 Months	32%
8 Months	38%	20 Months	30%
9 Months	33%	21 Months	29%
10 Months	30%	22 Months	27%
11 Months	27%	23 Months	26%
1 Year	25%	2 Years	25%

For Tier 2 properties, all other properties, if the former owner redeems their property sold at auction the Investor not only receives the amount paid at auction, but also 25% of the following total amount:

• The amount paid at the auction
• Recording Fees
• Any additional property taxes paid from the time of the auction to the time redeemed.

Here's an example of how a TLC purchase could work in Texas:

Winning Bid Amount: $10,000.00

Recording Fees: $10.00

Additional Taxes Paid: $500.00

Total: $10,510.00

25% of $10,510 is $2,627.50
So, the Investor is paid a total of $12,627.50.

Now, if the former owner fails to redeem the property within the Redemption Period, the Investor gets a deed to the property. This is an “Absolute Deed” as compared to the “Purchaser’s Deed” with “Right of Redemption” given at the auction. Obviously, when the property isn’t redeemed, you receive the biggest return, complete ownership of that property. But even if the former owner does redeem, there is plenty of opportunity to make money investing in Texas Open Bid Tax Auctions.