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What is a Tax Deed?

If you are new to the world of tax lien and deed investing, you’ll definitely ask me, “What is tax deed investing, Dustin?”. A tax deed is a legal document that allows the government to take over a property when the owner doesn’t pay their property taxes. If the taxes remain unpaid for too long, the government can sell the property at a tax sale to recover the money. The tax deed gives the new buyer full ownership of the property.

Buying through a tax deed sale can be a way to get property at a lower price, but there may be risks like unpaid liens. Overall, tax deeds help the government collect taxes while offering buyers a chance to invest in real estate.

The Process of Acquiring a Tax Deed

How can you acquire a tax deed? When a property owner doesn’t pay their taxes, the taxing authority can initiate the process to claim the property. Here’s how it works:

1. Notification: The property owner is notified of the delinquency and given a chance to settle the dues.

2. Tax Deed Application: If the taxes remain unpaid, the authority applies for a tax deed.

3. Public Notice: Notices are posted on the property and in public places, announcing the upcoming sale.

4. Auction: The property is then auctioned off at a tax deed sale, where it is sold to the highest bidder.

What Happens at a Tax Deed Sale?

During a tax deed auction, bidding typically starts at an amount that covers the back taxes, interest, and administrative costs. The highest bidder wins the property and receives the tax deed. In some states, there may be a redemption period, allowing the original owner to reclaim the property by paying off the owed taxes plus penalties.

Claiming a Property After A Tax Sale

Buying a tax deed does not automatically clear all liens or claims on the property. The new owner may need to take legal steps, such as filing a quiet title action, to ensure the property’s title is free of any encumbrances. This can be a complicated process requiring legal assistance to make sure the title is marketable.

What are the Risks and Considerations?

While investing in tax deed properties can offer high returns, there are risks involved:

Unpaid Liens: The property may still have liens or claims that need to be resolved.

Property Condition: The property could be in poor condition, leading to additional costs for repairs.

Legal Issues: There may be unresolved title issues that require legal intervention.

Tax Deed Legal and Financial Implications

Once a tax deed is issued, the original owner and mortgage holders lose their rights to the property. However, in some states, with a redemption period, the original owner can reclaim the property by paying the owed taxes, penalties, and interest. If the property is redeemed, the investor typically gets back their investment plus interest.

Conclusion

Tax deed sales offer lucrative opportunities for investors but come with risks. Proper research, including examining the property’s condition, liens, and title issues, is crucial to avoid pitfalls. Tax deeds play an essential role in municipal tax enforcement while offering real estate investment opportunities for those who do their due diligence.

Looking to get into tax deed investing? Book a call or grab our FREE tax lien and tax deed courses to learn how you can start investing today. Get everything you need to succeed here: Free Courses & Book a Call.

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About Dustin Hahn

Dustin Hahn is a Tax Lien & Deed investor with over 22 years of experience and hundreds of deals under his belt. He created Tax Lien School.com to help you buy Tax Deeds up to 90% off mortgage free and earn up to 36% ROI with Tax Liens. This site was voted the “Most Useful Resource” for new investors. Dustin’s YouTube Channel is the #1 Channel on Tax Liens & Deeds with over 98,000 Subscribers and 3600 videos to help you start. “The Best Time To Start Real Estate Investing Was 20 Years Ago, The Second Best Time Is TODAY!”

20+yrs

5–10deals/mo

2009TLS founded