F.A.Q

Frequently Asked Questions (FAQs)

Access a comprehensive collection of answers to your top tax sale questions, covering everything from bidding strategies and property redemption periods to risk management and profit maximization.
Tax Lien
Redeemable Deed
Hybrid Tax Sales
Over The Counter

Tax Deed

This is when you buy properties that the government is selling because the owners didn't pay their property taxes.

Begin by learning about properties, the rules in your area, and going to property sales.

You can often buy properties cheaply, which might lead to good profits, but there are risks too.

These allow the original owner a set time to pay their taxes and get their property back, which can affect your investment.

 Look for homes, condos, or land that could increase in value.

Stay away from land that can't be used, has pollution issues, or has too many legal problems.

Do thorough research on each property, make sure you understand the costs, and stick to your budget.

The county will notify you when a homeowner pays their taxes. You must return the certificate to the county, which will then send you your money, including interest.

Know the property rights, check everything carefully, and it's a good idea to talk to a lawyer.

A 'cloud' means there are issues with the property’s paperwork that make it hard to sell. Getting a special certificate or going through a legal process can fix this.

Yes, In some states and counties, they have online auctions, you can buy properties through internet auctions.

This is the time when the original owner can pay off their taxes and take back their property.

Tax Lien

 This involves buying a claim on a property because the owner didn't pay their taxes. You don't own the property, but you can earn interest or take over the property if taxes remain unpaid.

You can buy tax liens at auctions held by local governments, either in-person or online, or through over-the-counter sales where unsold liens are available.

 Investing in tax liens can be profitable. You earn interest on the unpaid taxes, which can be quite high depending on the state.

The main risks include the possibility of the property being worthless, additional unforeseen costs, and the complexity of foreclosure if the owner doesn't pay.

 Research is key. Know the property, understand local tax laws, and prepare for potential additional costs like legal fees or property maintenance.

Auctions can be competitive, and bidding may involve either a fixed cash amount or an interest rate. Lower bids on the interest rate mean lower profits.

If the owner fails to clear their tax bill, including penalties and interest, the lien holder may foreclose on the property.

Ideal properties include single-family homes, condos, and commercial properties. Avoid land with no practical use or severe restrictions.

Start by understanding the local rules and regulations, find out where and when liens are sold, and prepare to bid at auctions considering your total budget, including potential additional costs.

Yes, many counties offer tax liens through online platforms, making it convenient to participate in auctions remotely.

Redeemable Deed

A redeemable deed is a type of property purchase at tax sales where the original owner has the opportunity to reclaim the property by paying off the owed taxes plus a penalty within a specified redemption period.

Redeemable deeds are a hybrid between tax liens and tax deeds. When you purchase a redeemable deed, you essentially buy the property, but the original owner may reclaim it during the redemption period by fulfilling the financial obligations.

If the original owner redeems the property, you typically receive the amount you paid at the auction plus a significant penalty rate, providing a return on your investment.

The risks include the possibility of the original owner redeeming the property, which would prevent you from taking full ownership, and the potential challenges of managing property rights during the redemption period.

 Financing options are generally limited; most investors use personal funds or gather external investor capital. Some platforms may offer specific financing options for these types of investments.

It's important to consult with a tax sale attorney to understand specific state procedures, be aware of the varying redemption periods, and be prepared for either the outcome of the investment—redemption by the owner or full ownership transfer after the redemption period.

Hybrid Tax Sales

Hybrid tax sales combine elements of both tax liens and tax deeds. In these sales, a tax lien might initially be issued, which can convert to a tax deed sale if the taxes remain unpaid.

The bidding process can vary significantly. In some areas, properties might be offered on first come, first serve, or through a sealed bid system. The exact method depends on the local statutes governing tax sales.

 In hybrid systems, if a tax lien is not redeemed, it may proceed to a tax deed sale, where the property is sold outright to the highest bidder, allowing the investor to potentially acquire the property.

Redemption periods can vary by jurisdiction. Typically, they may extend from several months to a few years, providing the original owner a window to repay the back taxes with interest or penalties.

While some hybrid tax sales may be conducted online, others require physical attendance. It largely depends on the specific regulations of the county or state conducting the sale.

OTC (Over-the-counter) Tax Sales

 OTC tax sales refer to the process of buying tax liens or deeds directly from the county or municipality after they were not sold at auction. These properties can often be purchased without the competitive bidding process that characterizes live auctions.

You can typically buy OTC properties by obtaining a list from the county, which may be available online or by direct request. Once you have the list, you select the properties you are interested in, perform due diligence, and then send the payment to the county to acquire the tax certificates or deeds.

OTC properties can vary but often include vacant land, commercial properties, and sometimes residential homes. However, it's common for these properties to be those that were less desirable at auction, so careful due diligence is crucial.

Yes, the primary risk is the quality of the properties available, as many may have issues like being unbuildable, located in undesirable areas, or having title problems. It's vital to thoroughly research each property's background and legal standing.

The main advantages include the absence of a competitive bidding process and the potential to acquire properties at a lower cost, often just for the back taxes owed. Additionally, the process can be more straightforward and less time-consuming than participating in live auctions.

In some cases, the prices can be negotiable, especially if the properties have been on the OTC list for an extended period. Some counties may allow for sealed bids or even direct negotiation for the sale price.

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