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Okay everyone, I"m new here and would like more information on tax liens on a property. Up for auction on ebay are tax lien certificates on properties. From what I read, I would buy the tax lien certificate on the properties for xx amount of dollars. After that I would own the tax lien certificate for that property. I would also get interest of 18%, or whatever the interest amount is on the total tax lien on that property. Is this correct? IF this is correct, who will be paying me that 18% interest? Are there people nesting their money on these investments as appose to banks and cds? Let's say the outstanding lien amount for that property is for $20,000. So does this mean that I'll be getting 18% interest on a $20,000 lien on a property? How is all of that calculated?

Any info would help!

Thanks

Greetings,

One added point: You only get the Interest if in fact the property is redeemed by the property owner or someone who has a invested interest in the property redeems it (e.g., bank, lien-holders). However, your Investment is Back-up, as noted, by the Real-Estate/Property itself. As such, determining the value of the property becomes very important as it could determine how much you may be willing to pay or Invest in that particular property/parcel.

I hope this helps you some.
Much Success As You Invest!

Hello Peter J,

First, each state may have different procedures;however, I noticed that you are located in Iowa so I took the liberty to locate the Statute that governs Iowa Tax Sales. If you are interested in another state, then that statute should be read to ensure that you get the right answer. (see also your PM).

This is your question as I read and understand it:
Does the owner pay the county and then the county pays me the face value plus interest? This sounds fairly easy and possibly low risk, what am I missing??
Thank you

[/b]Here is the answer to your question, according to the the Statute, namely (Iowa Administrative Code): Title X, Financial Resources, Subtitle 2, Property Taxes Chapter 443-448: Statutes (Chapters and Sections) 2007 Merged Iowa Code and Supplement Statutes Title X[b]

447.1 Redemption - terms.
A parcel sold under this chapter and chapter 446 may be redeemed at any time before the right of redemption expires, by payment to the county treasurer, to be held by the treasurer subject to the order of the purchaser, of the amount for which the parcel was sold, including the fee for the certificate of purchase, and interest of two percent per month, counting each fraction of a month as an entire month, from the month of sale, and the total amount paid by the purchaser or the purchaser's assignee for any subsequent year, with interest at the same rate added on the amount of the payment for each subsequent year from the month of payment, counting each fraction of a month as an entire month. The amount of interest must be at least one dollar and shall be rounded to the nearest whole dollar. Interest shall accrue on subsequent amounts as provided in section 446.32 . The redemption must be received by the treasurer on or before the last day of the month to avoid additional interest being added to the amount necessary to redeem. However, if the last day of a month falls on a Saturday, Sunday, or a holiday, the payment must be received by the treasurer by the close of business on the first business day of the following month.
When the county or city is the certificate holder of the parcel redeemed from a sale held under section 446.19 , the redemption amount shall be apportioned among the several funds for which the taxes were levied. All interest, costs, and fees shall be apportioned to the general fund of the county regardless of who is the certificate holder. If a city is the certificate holder of the parcel redeemed from a sale held under section 446.7 or 446.28 , the city shall be entitled to the total amount redeemed.
[C51, §505; R60, §779; C73, §890; C97, §1436; S13, §1436; C24, 27, 31, 35, 39, § 7272; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, S81, §447.1; 81 Acts, ch 117, §1232]
91 Acts, ch 191, §89; 93 Acts, ch 73, §11 ; 2006 Acts, ch 1070, §27 , 31
Tax sale certificate fee, § 331.552 (23)
2006 amendment to unnumbered paragraph 1 takes effect April 20, 2006, and applies to parcels sold at tax sales held on or after June 1, 2006; 2006 Acts, ch 1070, §31
Section not amended; footnote revised
____________________________________________________

What are you missing? Well, it is really that simple; however, the only drawback(s) that I am aware that could actually affect your Investment is if an owner files Bankruptcy. If so, that could tie up your Investment until all is settled. I do not know how often that happens or if it happens regularly. I have not heard of any Investors having that issue, but you may want to ask here on BiggerPockets for more on that---okay!

Hope this helps---

I've purchased several tax liens here in NJ. What no one has mentioned is that you must also pay all subsequent taxes on the property each quarter. You also get 18% interest on those. However, if you fail to pay the taxes when they're due, anyone else can swoop in, pay that quarters taxes, and take your lien position away. You can still foreclose, but you'll have to pay them off. They can also foreclose, and they won't have to pay you anything because they have first position.
If you maintain first position by always paying the property tax on time, the owner has to pay you all the taxes plus the interest in order to redeem. If you decide to foreclose, you will most likely be paid off by the mortgage company if there is one, since they'll probably stand to lose a lot more than you. In fact, investors who are more interested in earning the cash than taking possession of the property specifically bid on properties with mortgages against them for that exact reason. On the other hand, if you're goal is to try to get hold of a house for a relatively small amount of cash, you'd be better off with a property that's free and clear. Keep in mind that the odds of this happening are relatively low if the property is in decent shape. Usually the owner will come up with the money somehow within the few years it takes to foreclose on a tax lien.
At least that's the way it works in NJ.

Hello Peter J,

Here is where I think we may need the expertise of a BK Attorney and/or the input from a Tax Sale Investor who has actually experienced this matter. Keep in mind: The BK Laws within that state would govern the process if the owner does file for BK (I know you know this). Nevertheless, I think this is an excellent question which should be posed to a BK Attorney in the state where you may have an interest in Investing and/or to some of the PROS here on (BP)--Bigger Pockets as well.

What I can say is this: When Taxes or Properties are Sold at Tax Sale---most delinquent owners are under the assumption that their "Property" has been "SOLD FOR BACK TAXES".
Note: Some Owners May option not to file for BK or are just under the assumption, again, that the property has been sold for Back Taxes, and are unable to pay the amount required to redeem their property. Always check for other lien holders if there is a property of particular interest to you as the bank or lender could also redeem the property---but because Tax Liens are precedent (1st Position) to all other liens, you would get the Interest, according the laws of that state. If not redeemed, then you would have to know the rules for that state, and follow the procedures to obtain your--DEED TO THE PROPERTY.

With that said, many delinquent tax payers are aware of the "Redemption Period, if any", but some States are Tax Deed States w/no Redemption period, thus making you, as an Investor, the owner of that property or parcels "FREE & CLEAR". ONE point of reference: Some Tax Deed States may grant the owner the right to redeem their property within the statutory period. For example, GA is a Tax Deed State, but their is a One Year Redemption period.

Hope this help you! Keep Asking Questions -- Good Questions !
Take Care & Much Success As You Invest !

Hello Doug F,

It sounds like you are Investing in Tax Liens in S.C.; therefore, based on the information you provided I would say that you are headed in the right direction with regards to Tax Liens in the state or county where you are currently investing.

Also, know that Tax Sales laws or rules are vastly different from state to state so the laws (Tax Sale Process) in S.C. are not at all the same as the process in other states/counties.

With regards to Buying Tax Liens of Ebay. Here my feedback on that question: In S.C. it appears that you are buying Tax Liens that place you in 1st position. However, if you decide to Buy a Tax Lien on Ebay or else-where the most advantageous position as an Investor is to "Buy Liens/Certificates" that will enable you to foreclose (if need) without worry about buying-out others who may also have purchased liens (taxes) on the same property. In other words, some people or entities who sell online (Ebay, etc..) may be offering liens that they bought and which may be subsequent taxes which were purchased at a later tax sale or other properties that may or may not have any marketable value. The importance here is: Buyer Beware and Perform your Due Diligence". On the other hand some Investors may be attempting to Assign their Liens/Certificates to you----just make sure you know the rules that govern the process in the area where you want to buy---very important.

Tax Sale Liens/Certificates are Great Investments but there are still loop-holes that some use to profit off of the unsuspecting or unaware Investor.

Online Tax Sale Tip for You: Bid4Assets Also Offers Liens/Certificates online Directly from the Counties.

Best Regards & Much Success As You Invest!

Hello Doug F,

First, like you, I trust that you will also get some feedback from others as well; however, here are my thoughts:

Depending on the State, you can offer (sell or transfer) your investment to another Investor. This is known as "Assignments". Contact the State or County Treasurers' Office prior to offering an lien or certificate to another Investor as there may be some specific steps to follow. With respect to those Deeds that you own outright "free and clear", you can offer those to anyone who may want to purchase or buy them from you or your company. If you have liens that you want to transfer, I would suggest you include in your offer the phrase "Due Diligence and Buyer Beware", etc.. as there may be some defects that you or a prospect (investor) may not be aware of if a complete title search has not been completed.

If it is a property that is Free and Clear, some may still want to do the complete title search to make it that much more "attractive" or "marketable" to a potential buyer or Investor, or that could be solely left up to that buyer or Investor.

Ebay Offers: I would make sure that the property is "Free and Clear" - owned outright by the seller, or if it is a lien/certificate--I would ensure that there are no other liens that have been sold for that parcel to an Investor. This puts you in 1st position and gives you the right to purchase subsequent taxes on that parcel. Benefit: You do not have to negotiate with another Investor who bought the taxes on the same property--which could keep you from foreclosing --if the Investor does not want to sell there certificate to you. (I hope this is clear---do not want to confuse you).

I like the idea of a group of Investors pooling their resources together for the purpose which you described---under a LLC.

Look forward to your reply, and I hope I addressed your questions. If not, let me know and hopefully we will also get some more feedback from others who are also in the business.

Much Success As You Invest,

Peter J. Follow up on what GD said. Each state is different but this an example of what an county site advises the deliquent taxpayer whose property is scheduled for sale at an deliquent tax sale.
Quote
I recently filed bankruptcy but still got a Notice and Summons.

Answer: Please have your bankruptcy's attorney notify the Delinquent Tax Attorney William J. Yost that you have filed bankruptcy and the bankruptcy court case number that has been assigned to your case. The orders and rules of the Bankruptcy Court including but not limited to the Automatic Stay are scrupulously observed by all the public officials involved once they have actual notice of the bankruptcy. Please do not hesitate to notify us or have your attorney notify us if you have filed bankruptcy and you are receiving notices from us after you have filed. Appropriate claims will be filed in your bankruptcy case and we will be pleased to discuss specific situations with your bankruptcy attorney if they will contact us.
End quote

It may be the taxpayers responsibility to contact the tax office with this information so that they can remove it or at least contact the purchaser of the parcel.

Hello Mark Yuschak and et al'

I hope this will help you take a little searching out of your research. Cut & Paste the following Links (see below).

Michigan Statute: Taxation of Real and Personal Property Chapter 211:

http://www.legislature.mi.gov/(S(l1plo53d2bfrr235a1wxcznn))/mileg.aspx?page=getObject&objectName=mcl-chap211

http://www.michigan.gov/treasury/1,1607,7-121-1751_2194-7640--,00.html

http://www.michigan.gov/treasury/0,1607,7-121-1751_3437---,00.html

Much Success As You Invest & Be Blessed!
GDH--

Joe, I can not speak for NJ, but a tax cert. does not by itself give you the right to foreclose. Usually the cert only gives you the right to obtain the interest. Some states do allow you to purchase all the remaining cert by bringing up to date all the remaining years taxes. This will keep you in a 1st position. However if another tax sale has already occured and the next years cert has been sold then whoever bought that cert is in 1st position and not you. Which means you could loose the entire investment.

Best place to go for answers is the county. Either the trustee or the Clerk and Master of that county is the person to talk to. They will not give you any type of legal advise but be able to answer your questions of "Can I foreclose?" ,"When is the next sale?", "How much is still owed for this property on taxes?", "Is there any other taxing bodies that I should talk to, such as city, or garbage collection, or utilities?"

Since it is already after the redemption perod why has he not already foreclosed on this property and claimed it for himself. Something is wrong with his information please check it out for yourslef before investing.