In most cases, buying tax lien or tax deed properties is profitable. But there are some instances when both systems do not yield the kind of results that the buyer or investor had expected or hoped for. First let us have a closer look to know the difference between a tax lien property and a tax deed property for sale.
TAX Lien for sale:
- Advantages: In a tax lien sale, you actually buy the taxes that the original property owner failed to pay. Since the tax lien certificate you bought represents the unpaid taxes of a delinquent property, the money you paid will actually go to the government to recover the unpaid taxes of that delinquent property. The actual cost of the property, in most cases is way up higher than the amount of tax you paid. The original owner, under the law of every US state, is given a certain period of time to recover the property by paying back the delinquent taxes plus the corresponding interests to the buyer. The interest alone gives the buyer a good return of his or her investment. Should the original owner fail to pay the taxes within the prescribed period given by the state, the buyer has the option to foreclose the property.
TAX Deed for sale:
- Advantages: Tax deed sales are sold for the same reason that the original owner failed to pay the taxes. The difference is that the government has opted to foreclose and offered full ownership of the property to recover the unpaid taxes plus other fees, interest and some encumbrance that are attached to the delinquent property. In some instances, the bidders go beyond the normal ceiling price set for the foreclosed property for reason of anticipating a good or profitable investment. This process of public competitive bidding is also called a “Foreclosure Auction.”
- Disadvantage of both Tax Lien and Tax Deed Sales: In many cases, you (buyer) are not even allowed to see or examine the inside of the house or the property you bought. So, you are left guessing about the interior condition of the property. You are not even aware if there are some dangerous or hazardous chemical stocked up inside the premises. One more drawback is if the owners still occupy the house and by the time they opted to leave, they willfully inflict some heavy damage, specially inside like clogging the toilet bowls and kitchen sinks. So, there are really some risk that a buyer of tax lien or tax deed properties has to face. However, in general, the positive side far outweighs the negative side in buying or investing in tax sales properties.
