Tax lien certificates are offered to the public in twenty-one states. New York and Ohio sell their tax lien certificates in bulk to large investment firms. A complete list of the tax lien states can be found in my blog post titled “Where to buy tax lien certificates”. The amount of interest paid on tax lien certificates varies from 8% to 36% and is dictated by individual state statute. The grace period or redemption period that the property owner is given to pay their delinquent property taxes is also dictated by individual state statute.
States where you can buy both tax lien certificates and tax deeds.
Some states sell both tax lien certificates and tax deeds. As mentioned above, New York and Ohio don’t sell their tax lien certificates to the general public. However, that only applies to their largest counties. The rest of the counties in New York and Ohio sell property tax deeds to the public. Florida and Pennsylvania sell both tax lien certificates and tax deeds to the public.
Tax Lien Certificates – Redeemable deeds
Texas, Tennessee, Georgia, Rhode Island, and Connecticut collect delinquent taxes by selling redeemable deeds. Redeemable deeds are technically a deed to the property, however, with the exception of Texas the investor cannot take possession of the property until the redemption period has expired. During the redemption period, the property owner can pay their delinquent property taxes along with interest and penalties and retain ownership of their property. If the property owner redeems, the investor receives their entire investment back plus interest or penalties. The amount of interest or penalties paid to the investor varies by state. In Texas, the investor receives 125% of their entire investment, meaning the investor makes a 25% profit on the transaction.
Tax lien certificate sales are handled at the county level in most states
The counties in tax lien states conduct the majority of tax lien certificate sales. The county treasurer or county tax collector sets up and manages the tax lien sale. You can find the complete details about the county’s tax lien certificate process and how the sales work by contacting the county treasurer or county tax collector’s office in the county that you want to invest in. There are some exceptions: in New Jersey tax lien certificate sales are conducted at the township level, in Maryland the city of Baltimore conducts their own tax lien certificate sale, and in Louisiana the sales are conducted by the parish. Once you have obtained the sale information, you can attend either the live sale or an Internet sale and purchase the tax lien certificates that you want.
In conclusion, getting the details of the tax lien sale is only the beginning of the process. In order to eliminate the possibility of making a costly mistake, you need to carefully evaluate each property. If you are new to this process it makes a lot of sense to get some training from a qualified expert. A qualified tax lien expert can show you step-by-step how to evaluate the investment and show you strategies that you can use to make the highest possible return on your investment.