Tax Foreclosures Create Opportunities for Investors

Posted by: Carleton Sheets in Taxes, tax lien certificate, tax lien, tax deed, Real Estate, mortgage servicer, mortgage, Foreclosure, escrow on Aug 19, 2009.

It looks like more homeowners are falling behind on paying their property taxes in these tough economic times, and many are suffering the consequences---foreclosure.

The homeowners whose property taxes are escrowed by the mortgage servicer and included each month with their monthly mortgage payment don't have to worry about paying their taxes---as long as they are able to make their mortgage payments on time.

However, if the mortgage servicer doesn't provide an escrow for taxes, or if the homeowners' properties are owned free and clear, their property taxes must be paid yearly (or according to state law). And even if homeowners are current on their mortgage, they can still be foreclosed on if they don't pay their property taxes.

Remember that property taxes are always a first-position lien on the property---regardless of the foreclosure filing date by other lien holders. You see, local governments depend on those tax dollars to provide services, and---depending on state law---when property taxes are not paid the county can file a tax lien against the property or auction off the deed itself to recoup the unpaid taxes.

Buying real estate tax lien certificates can offer a great return on investment for savvy investors who have available cash. By purchasing a tax certificate at county tax sales, you are entitled to a predetermined interest rate when back taxes are redeemed (paid) by the homeowners (which they are, in most cases). In Illinois, for example, a tax lien certificate holder can make as much as 36% interest!

And, in some states, if the taxes are not redeemed within the statutory time period, you may eventually be able to foreclose on the property. Keep in mind that every state is different. If this sounds like something you might be interested in, research your state's tax laws (often found on your state's website) before entering this niche market.

Have you or has someone you know had any experiences with tax sales? I'm looking forward to hearing from you!


Comments (5)Add Comment
Universaty student
written by Marcia Jean Heitsman, September 23, 2009
Outdoor activist for the Environment
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California Tax Deeds
written by Debbie Thompson, October 21, 2009
I am from Southern California and a few years back, the tax deeds that were foreclosed on had to be in default at least 5 years. I noticed this past year that some of the counties (San Bernardino and Riverside) were auctioning off the deeds over the Internet that were only in default for 1 - 2 years (or more). I looked for any information (on the Tax Collector's Websites) about the change, but I was unable to find anything. Does anyone have any information about this? Calling the Tax Collector's office results in nothing more than a major headache; being shuffled between 10 different people and then back again and visiting the offices of the Tax Collector ends up with you waiting for 4 -6 hours only to have them close up for the night; locking you out and telling you to try again the next day. Please HELP! This is the area of Real Estate I want to be investing in and have been studying for the past couple of years. Thanks so much!
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Hardship for sellers
written by steve Jones, January 26, 2010
Hardship for sellers that led to foreclosures of several properties across USA and especially California & Florida is a silver lining for buyers, as Florida homes are more affordable now than they likely will be ever again in the future.
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...
written by SHERMAN BOGARD, January 28, 2010
I am looking at tax sales here in the state of Indiana and particularly in the southre indiana area, starting with washington County. Has anyone here had any experienc in southern Indiana- Louisville, Ky Metro area?
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michael here
written by michael styris, September 08, 2010
hi michael here..

Real Estate Rental
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