Tax Deed Property
If you buy a home, you must pay property taxes to the county that home resides in. These taxes are split up and paid to several organizations. When homeowners fail to pay their property taxes on time, counties place a tax lien on their properties. Owners then have a set time to pay what they owe. This time limit will vary by state but can run from a few months to a few years.
If homeowners don't pay the taxes they owe, the home goes into tax foreclosure and tax collectors can then sell the home through a public tax deed sale.
Tax Deed
A tax deed is the legal document that transfers ownership in a property when a home has gone into foreclosure. Tax deed sales are auctions that occur when foreclosed homes are offered for sale to recoup the tax bill by the tax collector.
Basically, Tax deed sales allow you to purchase a home whose owners have not paid their property taxes.
How sales work?
The process works depends on the state the property resides in. Usually the county in which the home sits – must first get a tax deed. This is the legal document that gives the government body the right to sell a home to collect the delinquent taxes it’s owed.
Once the government agency has its tax deed, it can put the home up for sale during a public auction. The county will usually set a minimum bid for the homes it is selling. Buyers then bid on the properties and the highest bidder wins. If the successful bidder pays more for the home than the taxes owed – the excess amount can be paid to the former property owner.
Pros and Cons
Note: Buying a tax lien does not give you ownership of the home. It only gives you the right to collect unpaid property taxes.
The benefit of buying tax liens is that you can usually get them without spending a lot of money.
Credit Score Impact
References
- Tax Deed Properties: What They Are And How To Invest
- How a Short Sale or Foreclosure May Affect Your Credit Scores