tax liens and insurance claims

you buy a $4,500 tax lien on a $100,000 house and the house burns down. does the insurance company pay the tax lien or does the payment go directly to the insured who could take the money and abandon the property leaving the tax lien holder with lot value only as collateral?

There is no obligation to pay the tax lien. The money is paid to the insured party or parties, not the county tax authority.

The tax lien is not going away. It must either be paid or mature to you and you get the property, albeit, now a burned out house.

Perhaps the lot is worth the lien.

Somebody has to settle your lien.

I am not sure I would really agree with what was written.

The lien is there. How much it cost to convert the lien into the asset securing the lien could easily exceed the value of the lien. Or the person who owns the lien just does not have the cash and the time to pursue the matter. The lot can have some other liabilities (soil is contaminated, etc) so the lien holder will not want the lot. If there is contamination, then the person or entity on title will not way to redeem the lien.

There are houses in some rust belt cities where the back taxes are just too high for the lender who as already foreclosed to be interested in clearing the tax owed. They would rather give the property to the city. The city is not interested in taking the property back as it have negative value to the city. In some situations the lender paid the city to take the property back rather than pay the full taxes owed.

Lien investing is not without risk. The risks are manageable if you do your homework and are committed to making smart choices. That can include walking away from a lien you buy.

BTL, nice post. You elaborated on what I said in a few short sentences.

Yes indeed having been in this business for lots of years…IT IS NOT without risk.

If you are in this business and do not do your due diligence like any other business…soon…as P T Barnum said…“A fool and his money are soon parted.”

Thanks for a nice follow-up explanation.

Bill H

Thanks and glad I could help. Hopefully others who read this over the weeks and months will benefit.


You da man!

(this guy know his stuff I’m seeing…)


Can you take out insurance on the property you have the tax lien on?

Simple answer is NO.

Tax liens DO NOT give you any ownershp rights.

Insurance company will normally ask…when did you buy it…etc. Then will want to go out and take pictures, etc.

Why would you want to insure something you do not own?