You may be dealt with a tax lien or tax levy if you owe money to the Internal Revenue Service or IRS. This gives them the legal rights and claims to your property as well as assets.
The IRS is able to file a tax lien legally on any assets or rights to a property if a taxpayer owes back taxes to the government. However, once the tax debt is paid in full, the IRS tax lien can be released. It must be noted that liens can interfere with the property sale because the IRS can claim the right to the proceeds of the tax
While in a tax levy, it varies from a lien because the actual property and assets are seized by the IRS. They can seize property and sell later on. They can also levy property including wages, bank accounts, retirement accounts, and etc.
Tax liens are filed at the state level more times than not. Basically, this means two things for you as an investor. First, you may do more legwork because sometimes the tax lien records are not posted on the internet. Second, if you do more work, there is a higher chance of finding worthwhile properties. Finding a tax lien property is quite simple. However, finding a property that is worth purchasing is a bit tricky especially in today’s economic crisis.
Furthermore, the easier it is to locate an opportunity to invest in tax lien properties, the less valuable it is most likely. It would be best to look where nobody else is looking. This means you have to look for problem properties because the best deals are the ones which not many investors know about. So, do not forget to do your due diligence before going to any tax sale.
If the Internal Revenue Service or IRS filed a tax lien against your property because of unpaid taxes, and you have a difficult time getting it removed, it does not mean your house cannot be refinanced or sold later on. The IRS as a matter of fact, is often interested in helping a delinquent taxpayer’s financial situation. This in turn helps increase your ability to pay tax debt. You might be entitled for tax lien subordination if refinancing your property allows you to pay a lump sum to the government, or increase monthly disposable income.
If the IRS accepts your request for tax lien subordination, they would issue a certificate of subordination of federal tax lien. This document from the IRS permits a potential creditor to move ahead in the creditor position. However, only for the property named on the certificate of subordination and whose name you listed in your request.
In a tax lien state, upcoming tax sale notices are found in local newspaper classified section. Remember that investors are bidding on the interest rates on the lien and not the property. Whoever accepts the lowest interest rate would win the lien certificate.
The interest rate would vary according to the state as well as the redemption period in which the investor bought the tax lien certificate. The investors would be paid up to fifty percent when the homeowner pays their tax debt. It would also depend on the state laws if the delinquent homeowners do not pay. The investors can apply for a right to ownership or tax deed on the properties.
Always keep in mind that each state in the US has the right to endorse statutory laws in the collection of unpaid taxes. Make sure to conduct research on the properties and the state they belong to fit your tax lien investments needs.
If you want to earn several thousands of dollars at most in a year without the need to go to a tax sale, then you better go for tax lien overages. Tax lien overages are created when real estate investors at a tax sale bid more on properties. By connecting the homeowners with their funds, you get huge sums of money in the form of finder’s fees. Since these fees are generally capped out at ten percent on state funds, there are not so many money finders entering this venture. If there are a small percentage of them, almost a few know about tax lien overages are not subject to regulation. This means you can charge at most fifty percent which is alright with the homeowner because they get the money they truly deserve.
All across US, tax lien overages are created on a daily basis especially with the current foreclosure rate. The government is already holding a lot of money from these unclaimed funds. You would be wrong not to look into this type of opportunity. Do this if you are already spending time on doing due diligence on tax sale.
If it is your first time to buy a tax lien, it is a nice idea to start in your own county. This is the best thing to do because you are able to check out the property you’re interested, as well as its surroundings. Although you are not allowed to check the inside, this is still better than aiming for those properties on far locations or situated in other states.
Just like any other investments, there are some risks associated with tax liens. Investing in tax lien certificates should just be the same as any other type of business. In some states in the US, you may be required to take deed when you end up with an unprofitable property, in which you have bought its lien certificate. Being the new owner, you could potentially lose your investment because of a worthless property. This is why there is a need to research ahead the property you are interested, just to make sure it would be profitable in the end. Although tax liens have its risks, it is considered by many investors as one of the safest way of investing in real estate.
Tax liens and deeds investing follow a season just like other forms of investment. Online sales are the reason behind these seasons. Counties that do tax sales once per year are the result of this, and in fact there are some of them that conduct online sales. So, which of these tax lien states do regular online sales?
Arizona conducts online tax lien sales from February to March. While, Florida lien sales are held from May to June. Lastly, Colorado conducts online sales from September to November. Hence, these three states are the reason for the seasonal sale of properties.