Buying a property with a tax Lien

7 Replies

What do you know about purchasing a property with a tax lien? What are the pros and cons? Things to consider?  

What type of tax lien?

In MD there are annual tax sales for real estate taxes. Either the seller needs to pay the lien at settlement (if there is a lender involved... see below) or the buyer needs to factor in taking care of the lien immediately. The lien is accruing interest at a nice rate as well... plus attorneys fees are soon to follow. No lender will lend and no title insurer will insure a transaction in tax sale or following a tax sale unless the tax/lien is paid.

IRS and state tax liens are another matter... so let us know what you've got.

Thanks for your reply. I’m not certain which type of tax lien the property has. As a new investor I didn’t think to ask that question. I will confirm with my source and get back to you. 

Where are the MD annual real estate tax sales held?

@Dr. @Kristen Ray Every jurisdiction has its own tax sale. Some are live, others are online. Dates vary.

@Dr. @Kristen Ray most tax sales in MD are online.  Usually most MD sales are sometime in May through June.  

Most contracts for sale of real estate say the the property owner will provide "title free and clear of all encumbrances and liens. " This means you as the buyer don't need to worry about liens as they will be paid at settlement by the seller. 

However if the liens are much higher than the sales price the seller may simply not be able to sell.  Sometimes the seller actually has to come to settlement with cash to make the deal work .   If the seller is way upside down I would not expect the seller to do that.

Hello @Ned Carey thank you for your response! I was wondering where I could find such deals.  I am new to real estate and have been inundated with information.  Unfortunately, much of the information is not complete. For instance someone informed me that attaining a property with a tax lien could = a great deal. However, I was not fully informed on what that meant. I am not sure if the source fully understand what that meant either. I appreciate your response. 

@Dr. @Kristen Ray I believe what the person who told you that, was referring to was to buy a tax lien and then foreclose on the property.  In theory you can own a property for just the cost of the taxes. That is a tremendous deal. 

The reality is tax liens are sold at auctions. It is rare to get one simply for the amount of the taxes. Also there are cost to foreclose on the property.  Yes it can be a great deal, but just like any other way of finding deals, it is not a guarantee of being a good deal.

The non-profit National Tax Lien Association is a solid resource for knowledge & networking

NTLA.org

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