Hello…a newbie here…
I have some money to invest that I would like to be able to get to in a year or so and am interested in tax liens. My question is this: Is the tax lien I purchase in jeopardy if 1.) the house goes into foreclosure? or 2.) the owner goes into bankruptcy? I’m not interested in acquiring the properties…just interested in selling the lien back to the County once the redemption period is up for a decent interest rate. I guess I’m really asking what the risks are (ie: I have read to be sure the property should not have a homestead claim on it or an agricultural exemption). How would I find these? Thanks in advance for any help.
So, what your interested in is tax certificates.
A tax lien superseeds a foreclosure and a bankruptcy.
A property may be siezed for back taxes regardless of mortgage liens or other incumbrances!
A bankruptcy can not absolve money owed to a city, county or state for property taxes!
Tax Certificates are a very secure way to invest in real estate on a small scale, and is backed and supported by the tax jurisdiction.
(City, County or State tax authority.)
My question is this:
Is the tax lien I purchase in jeopardy if 1.) the house goes into foreclosure?.
The only risk here, and it is not really a risk, is tht the property will be redeemed. The foreclosure sale will not wipe the tax lien from title.
or 2.) the owner goes into bankruptcy?.
Bankruptcy willnotwipe the tax lien from title. It will tie it up until the BK Judge makes his ruling or the BK is discharged.
I’m not interested in acquiring the properties…just interested in selling the lien back to the County once the redemption period is up for a decent interest rate.
…You do not have a choice in the matter. If it is redeemed, you get paid, if not youget a tax deed. The taxing jurisdiction DOES NOT buy back property.
I guess I’m really asking what the risks are (ie: I have read to be sure the property should not have a homestead claim on it or an agricultural exemption).
…Sounds like you are talking about tax deeds in Texas…entirely different area.
TX is a tax deed state. At the sale you get a deed subject to redemption period of either 6 months or 2 years depending on how the property is held and used.
How would I find these? …Go read the Texas Tax Sale statutes.
Your bioggest risk is quite common…Buyingsomething that is not worth even the taxes…everything at the tax leins or tax deed sales is not worth the taxes.
For instance you can buy a vacated strip along side a roadway that is 5 X 2,000…USELESS. Have seen this same strip sold at least SIX times.
You can buy a burned out crack house…USELESS…costs more to clean up thanit is worth.
You can buy swamp land, landlocked land, dead end pieces of streets, all USELESS.
Tax lien investing is no more secure and guaranteed than any other part of real estate investing.
Caveat Emptor. Look BEFORE you leap.
Good Luck,
Bill H
Thanks in advance for any help.
Biggest risks roughly in order
- as Bill says is that the property is not worth the bid amount.
- Fire, I bid on vacant and abandoned property with the hope of foreclosing. Mast of these will not have insurance and if their is a fire I have bought a lien on an expensive pile of burnt sticks.
- Bankruptcy or voided sale. You won’t lose principal but you might not get all the interest you were expecting.
- Your money is tied up and not accessible until the lien is redeemed or foreclosure and resale.