Tax Lien Property Foreclosure

Tax LienForeclosure of a tax lien property is never a good experience to deal with. It is crucial to be aware of where you stand once your property has been foreclosed by the government or lender. And once the proceedings are put in place, you are going to have a limited time catching up on your mortgage payments.

Do this prior to the lender accelerating the payments, and to the point where they would accept nothing less than full payment for the property. If you intend to keep the property, the allotted time provided for this would vary depending on the loan provider. It would usually be no more than a couple of months.

Act on Tax Notices Right Away

Tax Lien Auctions

When the Internal Revenue Service or IRS sends you a notice on tax delinquency, whether on income or property, the first thing to do is to never ignore it. A notice sent by the IRS provide additional time and opportunity for you to respond, and save yourself from bankruptcy or losing property to tax lien auctions. The next thing to do is seek help from a licensed tax professional who knows how to handle and give advice to your dilemma. Tax professionals have the knowledge, deep understanding, and proficiency on how to apply the rules that govern different compliance issues, as well as tax debt scenarios to deal with.

You also need to review the tax returns from which your liability was obtained. Even the slightest mistakes such as declaring income or deductions twice can increase your tax liability. However, this can be fixed by filing an amendment. It is best to consult these things with your tax professional.

Are All Tax Liens The Same?

Tax Lien AuctionsThe answer is no. It is because liens vary in priority and types. Priority is very important. A good example of this is a first lien mortgage on a property. Moreover, a lender who is holding a senior lien in the form of a mortgage on a property has the right to repayment of its debt, before any junior lien holder.

The repayment is typically acquired through the proceeds of a mortgage foreclosure sale or tax lien auctions. In case you don’t know, foreclosure relinquishes all interests in the property that are junior to that mortgage. This is why first lien mortgage on a real estate is crucial.

Types of Common Liens

Tax Lien CertificatesUtility Lien
It is a lien filed on a property by the utility service or county for failure on the part of the homeowner to pay bills such as electricity or water.

Property Lien
When a homeowner fails to pay real estate taxes, then the county places a lien on the property. Then, the county puts up tax lien certificates in an auction and whoever wins the bidding gets the lien certificate.

Divorce Lien
A divorce lien is filed on a property as a result of an official order issued by a legal authority such as the court.

Mechanic’s Lien
It is the type of lien that is statutory and secures payment for labor, material, and services
related to improvements made on a property.

Judgment Lien
It is a type of lien created when a lawsuit is won against a defendant of a criminal case. Then, it is attached to the property in order to be received as payment after it is sold.

Tax Lien Certificates Help Fund Public Services

publicservThere are so many counties in the United States that conduct separate tax sales for their own liens.  Why do these counties sell these tax liens in the first place?  It is because they need the money to pay for public services such as police, schools, hospitals, parks, and many more.  By state laws, every county is authorized to collect the taxes due from each homeowner, which remains unpaid by selling at public auctions.  This can either be tax lien certificates or tax deeds.  It can also be both.

There are some books on the subject of selling tax liens.  Most counties have websites where you can get a list of these liens for sale.  Auction dates and frequently asked questions are also available to read.  Moreover, there are a number of approaches you can take to get more information which can be found in the internet.

Tax Lien Information You Need

needThere are lots of counties in the United States and each of them conducts separate auctions for tax liens.  Most of these counties have websites where you acquire a list of tax liens available, date of auction, and answers to frequently asked questions.  You can get these resources for free or at a price.

While there are a number of approaches that you can do at this point, the first thing to do is to conduct a research in your own county.  Go through the treasurer’s page on the website and find out the following:

-The date of the tax lien sale
-The location of the sale
-List of properties to be auctioned
-Rules of the sale
-List of unsold tax lien properties from previous sale

Once you acquire the information, set a schedule and the budget you’re going to need to buy the liens to the properties.

Tax Lien Sale Procedural Requirements

Tax Lien Sale Procedural RequirementsThere are procedural requirements in a tax lien sale that must be followed by the authority holding the auction.  First, a notice must be provided to the homeowner.  The notice would give a warning to him that his property is going to be sold.  It also gives a chance to pay any unpaid tax debt, fees, and other charges that have accumulated in the process.  Satisfying the tax debt to the government would give the homeowner an opportunity to avoid foreclosure, and losing his property.

Another procedural requirement that is worth noticing is the right of redemption by the homeowner.  A lot of states have redemption laws.  Such laws provide the homeowner a fixed period of time to pay any tax debt he owed.  The time period starts after the property is sold at the tax lien auction.  If the homeowner is able to pay up, he remains the rightful owner of the property.

Profit Opportunity in Tax Lien Certificates

Profit Opportunity in Tax Lien CertificatesTax lien certificates are in large numbers today because property owners fail to pay their tax obligations to the government.  When this happens, the government would put a lien on the property without hesitation.  They need to do this in order to recover lost revenues which in turn provide public services to the people.

If the property owner fails to pay back his tax debt within the redemption period, the government can sell off the property in the form of a tax lien certificate.  They can also foreclose it and sell the deed at a public auction.  Through this the investors can get a chance to take control of the lien, and earn an interest when the government sells off the property.

Investors that are interested in investing their money in tax lien certificates need to know when and where the sale would be held.  These tax sales are normally advertised in the public.  It also helps to take a visit in the county office to know more about this lucrative real estate investment.

Learning Tax Liens

Learning Tax LiensTax liens are placed on properties to guarantee that its taxes would have to be paid by the delinquent homeowners.  If there is a lien on a property, it cannot be refinanced nor sold until the taxes are paid.

Real estate investors can purchase tax liens as investments that pay interest rate as profits.  Liens are bought at a tax sale auction.  The investor who is willing to take the lowest rate of return gets the lien certificate.  Once the property is sold, the investor gets back his initial investment plus interest rate.  The amount is usually bigger than the investor could make in the stock market.  If the property is foreclosed, then the investor would get the right to own the property.

Purchase Foreclosure Property with These Reminders

Purchase Foreclosure Property with These RemindersWith lots of foreclosure in properties today because of homeowners unable to pay their taxes, how would you purchase one? There are some things to consider though when purchasing a tax lien or tax deed property. Here they are:

In most U.S. states, you purchase the property at a tax lien sale or tax deed auction. You are not allowed to access the property before the sale. You would just have the address in advance and at least drive-by to get a glimpse of its condition.

There are times when you drive-by you would see that the property is either occupied or vacant. If it is occupied, you would need to evict the current residents in accordance to the local laws. You must not forget this because the people living there might not move out, even after you buy the property.

All liens on the property must be recorded. Check with your municipality or county to understand the rules in your area. Ensure that you know the liens imposed upon the property. You can search for this through the county office that conducts the property registration in your area.