tax lien or tax deed

It does not matter which one you choose as they all end up the same way, for the most part.

The first thing to do is attend one of these sales without buying anything. This is to see for yourself how things are done and make notes of any questions that you may have. These questions can then be answered by hanging around and speaking to one or more of the investors who did purchase properties or by speaking to the officials afterward who conducted the sale.

Most of the time you are simply giving the homeowner a loan by paying the county taxes for them to the county. The county is actually selling you their "lien" on the property. It is up to you to know the foreclosure process that must be adhered to in order to actually possess the property. This usually entails a period of time in which the homeowner can repay the county what you gave it plus an amount of interest. This total amount of money will be sent to you (or given to you) when you complete a "release of lien" and you have your money back with interest (the amount is prededermined by state/county statutes).

If you are not paid back within the "redemption period" then you can foreclose with the power of that lien and claim the property as your own. Some states/counties will do this for you and in some you must not only go through a foreclosure process similar to what is happening to alot of todays homeowners, but you may have to evict those that are there (if anyone is).

You now own the property and since all tax liabilities go along with the property (not the owners of the property at the time of occurance) you now also have the responsibility to pay any and all property taxes for this parcel of land that have not been paid. If the reclaimation period is for more than 1 year you just may find the property that you purchased the lien on in the next years tax sale so after purchasing the lien it would behoove you to pay up all the back taxes as soon as possible and give a copy of that paid reciept to those officials that conduct the sale. In most areas they will add this amount to what the homeowner has to pay to reclaim his property, but there may or may not be any interest collected on this amount.

Only after the redemption period is over and you complete the foreclosure process are all liens against the property cancelled (if there are any besides yours). This is where the real benefit come in as you can imagine the taxes on any property is a whole lot less than almost any other way to purchase a parcel of land. With that said, it is up to you to actually find out everything about this property before you purchase it at one of these tax sales as it is almost always sold "as is". Which is to say that they can give you the information about the property that they have but will not guarantee in any way that that information is currently true.

If you purchase a parcel, then go look at it and see it needs to be "winterized", or windows fixed, or doors replaced, ect. and you do this to "protect" your investment there is absolutely NO guarantee that you will recoop any of that money spent, so you must be patient, very patient, so as not to spend any money that you may not be able to recover. As a matter of fact since you only have a lien against the property, you can be charged with "breaking and entering", or "illegal entry" , or "tresspassing" by the homeowner or a suspicous cop. This could be true even before you purchase the lien while you are doing due diligence to see if you want to bid on the property.

The risks are very great and the rewards are decent (interest) or very very good for those who are patient enough and lucky enough to actually obtain the property free and clear for such a small amount. You now have full rights to do anything (within zoning and code laws) that you want to with this property. So good luck and good investing.

Please be very careful as this post can not concievably cover all the pro's and con's of doing such a deal, and there are really too many different ways things can happen that it is not really possible to "walk someone through such a deal", but I hope I have covered quite a lot of the probablilites for everyone.

Just make sure that your tax sale is conducted by state/county officials or their "authorized representative" and not by someone who has purchased several tax liens and are selling them in a "tax sale". This is often a nightmare and why I suggest that you actually attend the tax sale at the city/county/state site and do not participate in one that is online even though some counties do conduct their sales online.