Tax Lien

A Tax Lien is a tax bond, prepared by the County of an American state for a non -paid tax of a property owner or property owner. These tax liens are offered by the counties of investors to collect overdue taxes. A Tax Deed is a deed to a piece of land or a property which, because of tax liabilities of the owners already owned by the county and offered by these also for sale.

  • 7.1 Legal regulations
  • 7.2 Auction rules
  • 7.3 Title Clearance / clarification external claims
  • 7.4 Validity of Tax Liens
  • 7.5 Search Error

Legal foundations

The fixed in every state in the United States tax on land and property (private and commercial) is the main source of income counties to fund schools, hospitals, fire and police departments. Each U.S. state has its own legislation. These laws differ in emphasis in the amount of the default penalty ( interest rate ) for the property owners and the duration of the repayment period and the term of the Tax Liens.

Sales process

Paid a tax debtor's tax too late, then the County has a right to this issue a Tax Lien and offer investors in these auctions. This tax bond has Erstrangigkeit over all other liens, such as the mortgage a bank. Now paid the tax debtor within the allowed repayment period ( Redemption Period ) his control, a penalty tax is due thereon in addition, which differs depending on the state in height. The Tax Lien owner then receives the value of the County Tax Liens and refunded the penalty tax. If the tax due is not paid within the redemption period prescribed by law, the Tax Lien owner can apply for a judicial foreclosure, and thus become the owner of the property or of the property. In some states, however, no tax liens are sold, but Tax Deeds. If a tax debtor does not pay his tax within the time fixed, then the County owner of the property or the Immobile. These counties then sell the property claims ( Tax Deeds ) to investors and the investor becomes the owner of the property.

Amortization period

In every state in the U.S., the amortization period for the tax not paid on time is controlled. This time period is 120 days to three years, even by state. Every Tax Lien owner has the opportunity to start after expiry of the deadline for repayment of the " Foreclosure Process" ( transfer of ownership ) to enforce its rights against the tax debtor. For this purpose, an attorney is on, to create all the necessary documents and legally recognized. As a Tax Lien has by law Erstrangigkeit lose all the other creditors that their claims. After completion of this process, the investor receives the ownership of the property ( see also # advantages of a Tax Deed Investment ).


The return on an investment in U.S. Tax Liens created by the statutory penalty tax and is between 6 % and 24 % per year. Yields on Tax Deeds may be higher because the counties offer at the auction the Tax Deeds to the amount of the overdue taxes plus penalty tax and fees by far. This land and property can be sold after the purchase of the investors at the market price. Property can be rented out and bring a continuous yield.


Sales of Tax Liens and Tax Deeds done at auctions, which take place at set times in the Counties Office or through online auctions. Investors outside of the U.S. can invest only through online auctions.

Depending on the state, there are defined procedure will be settled after the auctions and to which the investors must keep scrupulously.

Bid Down the Interest / bidding on the lowest acceptable return

Depending on the state of the maximum possible return defined. In the auction, the bidder with the lowest bid gets the contract. For example, the maximum yield is 18 % and the bidder can offer in 0.25 % steps down, in some countries even to 0 %. Provide several investors the same value, so determines, for instance the lot or it will continue to offer a rotating basis.

Bid Premium / Premium bid

With this method, the investor with the highest bid for the Tax Lien value the contract. In this supplement is sometimes also a return in most cases but do not get and therefore reduces this " premium surcharge " total return.

Random Selection / Random

With this method, the first bidder will be selected by lot or by computer, which can place a bid. In smaller counties with live auctions, this is done by the Autktionsleiter.

Rotational Selection / rotation selection

In this method, the bidder / Investor receives the bidder number 1 as the first option on the Tax Lien No. 1 has to offer. Is bidder No.1 no bid from, then bidder No.2 is asked to place a bid. Is the Tax Lien is sold or by any bidder places a bid, then gets bidder # 2 as the next possible on Tax Lien No. 2 has to offer, etc. With this method, the tenderer has no influence on how Tax Liens he can place a bid.

Bid Down the ownership / bidding on the lowest percentage of ownership of the property

The investor who is willing to accept the lowest proportion of mortgages of the property, receives the Tax Lien. This method is applied in only a few states, such as in Iowa. So Provides an investor 50 % ownership and he receives the Tax Lien and Tax Lien is not paid within the redemption period, the bidder receives only 50 % claim rights to the property, 50 % remain with the property owner. This method usually requires the involvement of lawyers is therefore expensive and complicated in handling.

Tax Liens, which are not sold at the auction, shall become the property of the county. In some states, these tax liens can be quasi purchased " over the counter " directly from the County in the so-called OTC Sales ( Over The Counter ). Other states sell these tax liens at the next auctions.

Advantages of a Tax Deed Investment

If the property tax is not paid within the allowable repayment period of a tax debtor, as is by law this property or the property the property of the counties on. This property will be auctioned at public auctions, both on-site in the building of the government as well as in online auctions. The minimum offered price for the property is made up of all tax liabilities plus interest plus possibly penalty tax plus all taxes and fees associated with the sale. The bidder with the highest bid is awarded the contract. Yes after competition in the sale can be purchased far below the current market value of real estate in order. Are these properties sold in the open market are double-digit returns very easy to reach. An alternative is renting the property, as this an additional passive income can be generated.

Error in Tax Lien and Tax Deed Investment

Legal regulations

Each state has its own specific rules for Tax Lien and Tax Deed Sales Process. These rules must be followed exactly threatening if not avoided in most cases, the total loss of the investment.

Auction rules

Payment of Tax Liens and Tax Deeds is the clearly defined terms of the type (cash, check, bank transfer ), the day and time. Failure to comply may also lead to loss of the advance payment and the claim.

Title Clearance / clarification external claims

At the latest after buying a Tax Deeds all external claims to be clarified. This is necessary because only the clarification and separation of all external claims of an insurance policy is possible. This insurance is required in order to sell the property on the open market. Claims of state government authorities ( tax authorities, etc.) always have priority and are to operate.

Validity of Tax Liens

Every Tax Lien has a statutory validity period (7 years, 10 years, etc.). Requested by the Tax Lien owner within this period no foreclosure, then the Tax Lien is irrevocably worthless after this period.

Search error

The American says: "You have to know what you buy, You buy what you know! " A detailed and comprehensive research is the basis for successful investing in Tax Liens and Tax Deeds. Here are the biggest mistakes can be made. In Tax Deeds must research be carried out more carefully, since the investments are higher and hence potential losses. The integration of a local real estate agent is required here, or personal evaluation of the property on site. Professional research is trained and taught by experienced professionals, an investment in this very interesting market is not carried out successfully without suitable training.

If you know an investor, what to do and observe, it is a very simple investment opportunity.