| Property tax is required to be paid on every parcel of | | | | the former owner has a specified amount of time |
| land in the United States. Revenue from property | | | | (anywhere from 15 days to 3 years) to reclaim the |
| taxes help fund such vital community services as | | | | property by repaying the amount bid at auction plus a |
| police departments, fire departments, and public | | | | penalty. If the former owner does redeem after the |
| schools. In order to ensure the prompt collection of | | | | sale, the purchaser of the tax deed receives their |
| property taxes, the county sells tax lien certificates | | | | money back and usually earns interest. For example, |
| and tax deeds to private investors. In this article, we | | | | Texas allows a 6-month period in most cases, with a |
| will be talking about tax deeds and tax deed sales. | | | | flat 25% penalty (paid to the tax deed purchaser) to |
| Depending on the state, property taxes are generally | | | | be added to the amount paid at the sale. If you |
| required to be paid once or twice a year. Property | | | | purchase a tax deed in a state with a redemption |
| taxes are considered to be delinquent if not paid within | | | | period, it is advisable not to put any additional money |
| a specified period of time. It usually takes about three | | | | into the property until after the redemption period |
| years of the property taxes not being paid before the | | | | passes. |
| county starts the foreclosure process on the property | | | | Besides doing research and due diligence on |
| and puts the tax deed up for sale. The property | | | | properties, all investors should know the answers to |
| owner is given the proper notice for all adverse | | | | the following questions before going to a tax deed |
| actions such as starting the foreclosure process and | | | | sale: |
| then advertising the tax deed for sale. The tax deed | | | | - What forms of payment are accepted and what are |
| sale (also called a tax deed auction) and all tax deeds | | | | the payment terms? |
| to be sold are required to be advertised in a | | | | - Are there any financing programs available? |
| newspaper. The property owner has up to the day of | | | | - Is there a redemption period after the sale and does |
| the tax deed sale to pay back all back taxes and | | | | the purchaser of the deed earn interest if the property |
| save their property from being sold to the highest | | | | it redeemed? |
| bidder. | | | | Tax deeds that don't sell at an auction are "struck off" |
| When real estate investors go to tax deed auctions, | | | | and added back to the county inventory. The county |
| they are attempting to buy the tax deed to a property | | | | can then either "resell" these properties at subsequent |
| and own that property "free and clear", meaning that | | | | auctions, or they can make these properties available |
| all mortgages on the property are extinguished. | | | | "over the counter". With OTC sales, the county |
| The bidding method for most tax deed auctions is | | | | accepts private bids online, by mail, or in person. |
| premium bidding. In the premium bidding method, the | | | | Depending on the county, and other factors, it is |
| minimum bid is generally determined by the amount of | | | | possible for investors to get some OTC properties for |
| back taxes owed plus interest, as well as all costs | | | | less than the amount of back taxes. |
| associated with selling the property. The bidding starts | | | | As a tax deed investor, it is important that you have |
| and the winning bidder is the investor who is willing to | | | | goals and objectives. It is a good idea to ask yourself |
| pay the highest premium on the property. Available | | | | the following questions? |
| payment methods and terms vary by county. Most | | | | - Do you want to hang on to the property and rent it |
| states and counties required that tax deeds are | | | | with a positive cash flow? |
| purchased with cash, money order, or cashier's check, | | | | - Do you want to sell the property immediately for |
| but a few counties will accept personal checks. Some | | | | under market value in a "quick sale"? |
| states and counties require full payment of the tax | | | | - Do you want to buy vacant land and build your |
| deed by the end of the day, while others only require a | | | | dream home on that land? |
| percentage of the tax deed purchase price and give | | | | - Do you want to buy commercial real estate to use |
| the investor 30-90 days to pay the balance. In some | | | | or to resell? |
| states, including California, the title to the property will | | | | The bottom line is that you should never jump into any |
| not be transferred to the purchaser until the tax deed | | | | kind of investment without doing thorough research |
| purchase price is paid in full. | | | | and knowing your long-term goals and the risks |
| Some jurisdictions offer a "redemption period" to the | | | | involved. |
| original property owner. During this redemption period, | | | | |