Owning a real estate is tricky. It comes with a lot of documentation, legal proceedings and tax filings.
It comes with a lot of documentation, legal proceedings and tax filings.
However, Resolve Suite understands that comprehending the tax structure is no easy task, especially when the rules vary from state to state and county to county. We have developed a comprehensive and interactive tax sale guide that walks you through all the technical aspects of real estate tax sales.
What are Tax Sales and Why are they Important?
Anyone who owns a property must pay real estate tax to the government. The government then uses that tax money to provide various public facilities and develop infrastructure.
However, what if you fail to pay those taxes as a real estate owner? The government has then entitled the rights for your property and they set your property for sale at an auction. The government uses the money generated from auction to recover the unpaid tax costs.
There are two types of tax sales – Tax Lien Sales and Tax Deed sales.
1. Tax Lien Sales
A tax lien sale is a lucrative investment opportunity for real estate investors. At a tax lien sale auction, the bidder is not bidding on the property itself. Rather he is bidding on the accrued and pending tax amount.
Essentially what the investor is doing is lending money to the property owner to pay taxes. In return of the investment, he is given a ‘Primary Lien Status’ that comes right after state tax liens.
After paying the accrued tax amount on a property, the investor is then given a ‘Tax Lien Certificate’. This is usually a win-win situation for an investor because the tax price is usually a very insignificant fraction of the actual property price which if they fail to pay you, you can foreclose on the home.
In addition to that, because of the primary lien status, the investor receives the principal interest paid by the owner on property tax. The interest is usually very high and ranges somewhere from 8% to 24% and sometimes up to 50%.
2. Tax Deed Sale
In a tax deed sale, the investor purchases the rights to the deed of the property, unlike tax lien sale. Under this deal, the investors are termed as the new owner of the property after a waiting period. Transfer of rights takes place and investor purchasing a tax deed can purchase all the rights at only a fraction of the actual property price. This is due to the fact that the tax deeds are priced at a small percentage of market value.
Want to get all the information related to real estate tax sales at one place? The online interactive tax sale guide created by Resolve Suite is the best investment for you.