All real estate is taxed by the county or municipality. There are always individuals who do not pay their taxes. This as a problem for the government because they have budgeted real estate tax income into their annual budget and now, due to nonpayment, they are faced with a cash flow problem. By selling Tax Lien Certificates they are able to fulfill their budget requirements.

Tax Lien Certificates are liens placed on property. They are sold by the county or municipality for the amount of tax outstanding so that they may receive the tax revenue to run the government. They are extremely attractive as an investment because they are very low risk investments that are secured and guaranteed by real estate. Most importantly, when the tax is paid, the Tax Lien Certificate holder received a very high rate of interest that is fixed by law.

When you buy a Tax Lien Certificate, all you are doing is paying the outstanding tax on a piece of property. In return, you will receive your investment back plus interest. Tax Lien Certificates typically have very high interest rates that are set and fixed by each state. When you purchase a Tax Lien certificate, you purchase the right to all interest and penalties associated with at particular tax bill.

The purchase of a Tax Lien Certificate does not allow you access to that property. You will not be evicting anyone from their home or be responsible for any mortgage payments. You are not responsible for collecting the back tax. although the county or municipality has received its revenue from the sale of the Tax Lien Certificate, they will still pursue the tax from the property owner plus interest.

Are You Buying Property?

the Tax Lien Certificate is the priority lien on the real estate. Tax Lien Certificates are not the sale of land or property, but a lien for the amount of delinquent taxes plus interest and penalties. Very seldom do you actually gain property simply by purchasing a Tax Lien Certificate. Most liens are paid within 203 years and that less than 5% of all the Tax Liens are not paid. In the unlikely circumstances that the owner fail to pay the property tax lien, and you were to won the home for the price you paid for the Tax Lien Certificate it would be like winning the lottery.

Best Kept Investment Secret

Why aren't these highly publicized? Unlike selling real estate or stocks and bond, there are no commissions involved. Brokers do not make any money on the sale of Tax Lien Certificates, so they do not promote them. Banks and investors want to keep this quite because of the high yield they receive from Tax Lien Certificates.

How Can They Pay Such High Interest?

When taxes are not paid on a timely basis the Government can penalize tax payers as they see fit. The interest rates that the governments charge on delinquent taxes are typically higher than the prime rate. When the county or municipality issues Tax Lien Certificates, the interest rate is paid to the investor.

Introduction

Interest rates on Tax Lien Certificates ranges from 8% to 24% in the first year and can go as high as 50% in the second year. That alone makes them a very attractive investment. When you also consider that these Tax Lien certificates are issued by county or municipality and are backed by property that exceeds the value of the tax, this makes them an investment that you can not pass up.

When studying Tax Lien certificates one of the most important things to know is all counties have different procedures regarding Tax Lien Certificates, even within the same state. When you consider investing in Tax Lien Certificates, it is im9portant that you obtain all the information on purchasing Tax Lien Certificates from the counties or municipalities where you plan to buy your Tax Lien Certificates. Even within the same state the process of purchasing Tax Lien certificates varies from county to county.

How To Bid

The bidding process for Tax Lien certificates differs from state to state and even county to county within the same state. Most states sell Tax Lien certificates by public auction. you must contact the county in which you are interested in bidding for details on when and how they sell Tax Lien Certificates.

The following is a brief outline of the different bidding procedures:

1. The amount of the certificate is bid up. The surplus bid over the tax is not reimbursed to the bidder. For example if the cost of the certificate is $3,000 and you pay $4,000, you would only be paid the $3,000 plus interest on that amount.

2. The amount of the certificate is bid up. The total bid price plus interest is returned to the bidder. For example if the cost of the certificate is $3,000 and you pay $4,000, you would be paid the $4,000 plus interest on that amount.

3. The bidding starts at the state set rate and allows for competitive bidding to lowering the interest rate. For example if the state set interest rate is 18% competitive bidding would start at 17% and work it's way down.

4. Bid is based on the amount of property the bidder would control in the event of the foreclosure. For example, if the certificate was $3,000 it would be awarded to the person who is willing to take the smallest interest in the property.

Who Can Buy

Anyone can buy a Tax Lien certificate. You can purchase as many Tax Lien certificates as your budget allows. You will be required to pay the government agency at the time of purchase. You should always investigate as to what type of payment the county requires.

What Are The Risks

The Tax Lien Certificate is secured by the real estate that the tax is delinquent on. If the real estate is worth less than the tax, then you have a very risky investment. But, real estate taxes are based on a percentage of the value of the real estate and are therefore less than the actual value of the real estate.

When considering the purchase of a Tax Lien Certificate, you should do a simple record check with the town hall. If, for example, the property was formally a Chemical Plant, you might want to avoid bidding on that property. Taxes on undesirable property has a higher chance of not being paid. This would raise your chance of actually owning the property and all the problems that go with it. You safest option is to only bid on residential property.

Buy Tax Lien Certificates