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Government tax sale propertiesProperty owners in the US must pay property tax to the government . This tax money is used by the government to provide services to the population such as hospitals, roads, law enforcements, and such other amenities to the public . If the homeowner has not paid tax for a prolonged period, the government arranges the sale of the property in an auction. The tax defaulted property is auctioned in order to collect the taxes, penalties and interest due on the property . It also forces the home owner to pay the taxes . After the property is sold in this way, and after paying the taxes and other costs from the sale proceeds, the excess amount can be claimed by the former owner of the house and other lien holders . Usually, a detailed account of all tax default properties is maintained by the auditor . The properties that have more than two unpaid tax installments are listed on the tax lien sale . The outstanding tax is recovered through the sale of the property in Tax sale in auction . Tax sale is of two types namely, tax lien sales and tax deed sales.
Sale of Tax Lean
In tax lien sales the bid is made on the tax owed and not the property . The house owner gets a loan for paying tax dues but still owns the house . Only the tax lien changes hands. The county conducts the auction to collect the tax due on the property . The value of tax liens is equal to a fraction of the market value of the property . This opportunity has the potential of high earning on investment for the buyer of the tax lien . The buyer becomes the first lien holder to the property by purchasing the tax lien. He pays the tax dues on the property to the government . In return, he gets the second priority in the lien on the property, as the state tax lien gets the first priority. The buyer also gets a certificate for the purchase. The investor has the right to receive interest from the tax defaulter for the entire delinquency period till he settles all the dues and charges. The interest rate is usually very high amounting to one fourth of the value of the amount loaned . He can foreclose the tax lien if the defaulter does not pay the lien as per the stipulated terms . By doing so, the investor gets the ownership of the property .
Advantage of buying tax sale properties
By investing in the tax lien certificates, the investor earns up to 30 per cent returns on his investment whereas bank interest rates are around 4 per cent . These certificates can be bought for prices as low as 50 dollars and the buyer even gets a chance to own the house by paying the outstanding taxes and becoming the tax lien certificate buyer. The tax lien sales are conducted on the internet and bids are placed electronically making it easier to buy property.
Sale of Tax deed
As against the tax lien sales where the tax lien alone is auctioned, the deed of the property for which the tax is overdue is sold . The winner of the auction buys the ownership of the property . The tax deed is the written document that declares title to the property with tax dues that is sold by the government at public auction . He gets the ownership of the property and gets all other rights pertaining to the property, after settling all taxes and other dues . The buyer gets property rights at an extremely low price . The property tax equals a very small amount compared to its market price . The properties that are not sold in two consecutive auctions are handed over by the authorities to Non-profit organizations or sold to others through the building Department . Investing in tax deeds offers even better opportunities to earn high returns . You can buy property for as low a price as the tax due or even lower by investing in tax deed purchase .
Finding a Tax sale
The county government\'s office has the list of properties with tax dues that are on sale . You can have specific information about these properties on tax sale and can initiate action towards the purchase of tax lien or the tax deed . There is no need to wait till the auction date, as some of the tax defaulters may be ready to sell the properties even before the auction. Some of the old tax lien buyers may also be interested in selling the tax lien certificates and these can also be considered for purchase .
Precaution
Before the purchase, the value and other details of the property should be checked to avoid any risk .
You should ascertain if it is a tax sale or sale of the tax deed as they have different sets of regulations .
if you are of the states laws governing the tax sales before going in for purchase of tax lien or the tax deed as some states do not allow these sales .
Sale Process and investing
The government authority will recover the unpaid tax, interest and accrued costs by offering the property\'s tax lien or tax deed . The authority publishes notices containing the lists of tax delinquent properties and their details such as the tax due and the duration . This notice serves as a warning to the property owner to expedite his payment of tax and other charges immediately . The public is also informed of the properties coming up for government tax sale . Normally the property owner is given sufficient time to settle the property tax dues and avoid the auction of his property. If the property owner fails to pay tax within the stipulated time, the government goes ahead with the proceedings for foreclosure of the said property .
If the property is sold in tax deed sale, the owner still has time to repurchase the property and retain his ownership for a specified period . If he does not repurchase it within that period, he loses the right to repurchase the property . If you want to invest in tax sale properties you can benefit even well in advance of the auction by approaching the delinquent property owners or the recent buyers who bought them who are willing to sell them . Investors can use the published tax sale list for this purpose . You can get very high returns for your investment or you may even get ownership of the property at a fraction of its market price if the owner is unable to pay the tax dues and other charges within the specified time.
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