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  • Writer's pictureTaleen Krug

Is Buying Property with Delinquent Back Taxes a Good Idea?

To understand the significance of a property having delinquent property taxes, continue reading.

According to the U.S. Census Bureau, the average American household shells out a whopping $2,471 per year for these pesky payments. Failing to fork over this cash might just land you in some serious financial hot water, drowning in a sea of missed opportunities and mounting debts. So, make sure you keep those property taxes in check, or else your dream home might just turn into a nightmare!

Neglecting to pay your property tax bill could result in losing your beloved home. When left unpaid, the county has the power to swoop in and sell a tax lien certificate, ensuring that the government gets its due. Don't wait for the countdown, take action now!

Counties sell tax lien certificates each year to the highest-paying investors, who can also charge interest to recover the property tax debt.

Investors, private investors, and individual investors must pay the unpaid property taxes and any additional charges or fines when buying a tax lien. The investor will collect the debt from the homeowner, following local guidelines on interest rates and payment schedules.

If the homeowner can't cough up the cash, the investor gets to snatch up the property title through a great tax sale.

Tax Lien Certificate Sales vs. Tax Deed Sales

In tax deed sales, like at a tax lien auction, the winning bidder gains ownership of the property, unlike tax lien certificate sales where only the tax liability is purchased. A portion of the sale will be used to pay off the tax debt, while the remaining amount will be retained by the property owner.

In some states, homeowners have the incredible opportunity to reclaim their property and become proud owners once again by paying off their taxes, while in others, the buyer takes on the role of the triumphant owner.

Discover the Hidden Key to Scooping Up Properties with Unpaid Taxes

If you're ready to become the proud owner of a tax-sale property, buckle up and prepare to embark on an exciting journey! Just remember, each county and state has its own unique set of steps and processes for conducting a tax sale, so be sure to do your homework and make a savvy investment.

Research Properties

It is recommended to conduct thorough research and investigation on a property of interest before making a decision, as there may be additional liens, such as tax liens, that could impact its value. If there are other liens present, this investment may not be a good choice.

If you dare to take the leap and buy a tax-sale property, beware! Hidden liens could be lurking in the shadows, ready to snatch away your dream home. Before you celebrate your victory, make sure to settle all the debts, or risk losing it all.

It is unlikely that you will be able to physically inspect the interior of the home before purchase.

Follow Through With Your Investment

If you are the highest bidder, you are required to provide payment for the home. This can be done by presenting cash or a cashier's check for the full amount. The deadline for paying off your balance may vary depending on your county's guidelines. However, in certain situations, payment may be required immediately following the auction.

Regardless of your decision, it is advisable to be financially prepared for the auction to ensure a smooth transaction in case of a successful bid.

After completing the transaction, the individual becomes the owner of the home and has the freedom to use the property as desired.

Important Factors to Consider When Purchasing a Property with Unpaid Taxes

Purchasing properties at a tax sale can be a highly competitive environment, and newcomers to the scene often run the risk of paying too much for a property. Consequently, there are limited opportunities available for experienced investors who could potentially gain significant profits.

Not all properties will make it to the auction block! The county might decide to skip out on certain properties due to factors like property taxes or homeowner bankruptcy. So even after diving deep into the world of property research, only one lucky property will steal the show at the auction!

Explore a collection of off-market properties that offer excellent investment opportunities. However, it is important to be cautious as not all properties may provide the desired returns. Before investing, it is advisable to understand the tax laws and guidelines applicable to your state and county. By exploring past sales, you can discover numerous deals in your local area. Evaluate this investment opportunity to see if it matches your goals and risk tolerance.

Tax sales can be appealing to savvy investors, but they require upfront money and carry risks for novice investors. If you lack the capital, consider mutual funds or ETFs. Research and seek advice before investing in tax sales.

Considerations for Investing in Tax Lien Properties

Consider downsides when buying tax lien properties. Buying tax lien properties is risky such as these:

Blind Purchase

Buying a property at auction is risky because you can't see it or get an inspection report, so you might end up with a bad deal.


Investors attracted by higher interest rates may face foreclosure if the tax lien property owners cannot repay. Foreclosed properties and going through the foreclosure process may or may not be desirable, depending on your situation.

Short-Term Gains

When a tax lien is won, the government determines the redemption period, which typically varies from a few months to several years. Once the redeemable period expires, your investment will cease to generate any further profits.

The property owner has repaid their delinquent taxes, resulting in limited short-term gains and no long-term potential as an investment.

An Advanced Investment

Tax lien investing can be a real rollercoaster ride whether you go to a public auction, decide to embark on the foreclosure process, or seek out county treasurers or other homes that may have a property lien.

While some pros can rake in the dough and make this a smart investment and have a risk tolerance, newbies can quickly find themselves drowning in a sea of confusion. So, before you take the plunge, and take any substantial risks, make sure to do your homework and sail into this type of investment strategy with your eyes wide open.

Overall: Is Investing in Tax Liens a Wise Choice?

Tax lien investments may be suitable for experienced real estate investors, those familiar with homeowner defaults as well as those property owners who are already familiar with local investment regulations. Many go to annual auctions, tax lien auctions, tax lien sales, and other tax-delinquent properties that are for sale to find these types of properties ranging from actual property to commercial properties.

However, it is not recommended for individuals looking to purchase a primary residence or novice investors. However, if done correctly, it can be a profitable venture.

If you're looking to invest in a tax lien property or relocate to Long Island in general, be sure to hire professional Realtors like Taleene and Ritchie Krug Jr. who can find you exactly what you're looking for in terms of the best home, house, condo, or townhome. Lifelong residents of Long Island, are part of a team with more than 40 years of combined real estate experience. They have a deep understanding of how real estate has evolved through the years which results in a team with unique dynamics and expert negotiating skills being put to work on your behalf. With 20 offices spanning Brooklyn Queens & Long Island, nobody is better equipped to handle your real estate needs.

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