Government Tax Sale Property: An Overview
The owner of every property has top give property taxes to the applicable local state government. The fee depends upon the value of the property and the state in which one owns the property. There are two types of government tax sale property used in the U.S. One is the tax deed, and other is the tax lien certificate. These certificates are issued against delinquent taxpayers who have not complied to pay their property taxes.
There are sometimes when the government tax lien certificates. There are different laws about tax lien property. Also, the procedures of possessing the lien properties differ from one state to another. Some states permit tax lien certificates to be bid on by interest rate. The winning bidder is the one who agrees upon the lowest price of interest on the tax lien.
After the selling of the tax lien certificate, the delinquent payer of the tax is required to pay back the amount to the owner of the tax lien certificate. This amount will include interest incurred which may be around 16% -18%. However, if the payer fails to pay the tax within the specific period, then the governing authority may be awarded the lien certificate holder with the deed to the property.
The earnings may be as high as 50 % depending on the state laws and regulations. If however, you get less than 50%, then also the investment is protected with the actual property.
In short, when the property owner is not able to spy the tax for his property, then the government may place a lien against the property for unpaid income taxes. Some of the criminal charges may also be charged if the owner has not paid the sewer or water charges, sidewalk repairs and many more. To attend all the delinquency, all the 50 states of the U.S. offer different schemes.
Property can be put on an auction even if the owner is in the process of disputing the tax or charge. For avoiding the lien tax, you should pay all the costs on your property. In 90 days of lien sale date, the government notifies all property owners by mail and the details concerning the state. After the sale, the owner owes the required amount of taxes and administration charges to the lien holder and not to the government.
So this means that it isnĀ’t possible for anyone to escape from paying off the taxes otherwise the government tax sale property may get seized out on an auction by the governing
Government Tax Lien Certificates: An Overview
Tax lien certificates are being offered in many states and counties in the U.S. So now you must be wondering what this is all about. To know about government tax lien certificates, you should know what a tax lien is.
A tax lien is a lien imposed on the property by law for securing payment of taxes. The tax liens may be imposed for delinquent taxes owed on real estate or personal property. LetÂ’s discuss how this works.
The owner of any property whether residential or commercial is required to pay some property taxes to the applicable local and state governments. This depends upon the value of that property and also the country in which the property is situated. Such type of taxes is also known as real estate taxes.
However, it has been a frequent occurrence that some people are not able to pay off the taxes to the government. Therefore, they become delinquent. After the establishment of the delinquency, the appropriate governing authority is in charge of collecting the property taxes. This is done through tax deed sale or tax deed auctions.
There are various states in the U.S., and all of them have a different set of rules and laws regarding the actions and collections of the delinquent taxes. For collecting such type of fees, usually, the local county government is responsible as the accumulated amount of tax is being utilized for improving the condition of the local communities.
There are two types of government tax sales used in the U.S. These are tax deed sales and tax lien certificates. For delinquent tax property, the local governments usually hold out the tax auction known as tax deed sale. The total sum of taxes is the minimum bid including any administrative charges and interest on the amount owed.
The person who offers the highest deed is being offered awarded the act of the property. However, you should remember that he set of rules and regulations regarding the possession and the time lapse required before assigning the absolute deed is different among the different states.
In case you have any tax question or you want more information about tax lien certificates and tax foreclosures, then you may take the consultation of a professional to guide you in the same. Tax lien certificates are also auctioned and valued at the tax owed and administrative charges and interests. However, there is a difference. In tax lien certificates, transfer of the property deed at the time of auction is not present.
Once the selling out of the tax lien certificates is through, the delinquent taxpayer has to pay back lien amount and the interest charges. These interest charges may be around 16-18% and are given to the owner of the property.
With these details on government tax lien certificates, you are now armed with the basic facts so go ahead with confidence.
Buy Tax Lien Certificates – A Multi Faceted Investment
Tax deed of covenant is a standard mode of investment for most people. Though they are trendy, yet they have only one method to give the return. If you buy tax lien certificates, you can get the return in some ways. There seems to be only one reason that people still invest in tax deeds when tax lien certificates are a way more lucrative option. It is because people are just unaware that tax lien certificates can earn through multiple channels.
The most common mode to get money out of a tax lien certificate is the condition where the lien gets redeemed. Most of the people do not get into tax problem deliberately. You shall notice that in almost every case, it is due to reasons out of their control that people are unable to pay the taxes. There is a common saying that bad times do not last forever. People get out of their financial trouble in most cases.
As soon as most of the people can sort out their financial issues, they attempt to get their lien property back. This happens in more than two-thirds of the cases. Once the original owner of the property receives enough money, he can pay back the lien amount as well as any interest and penalties accrued thereof.
The second common way to get money out of your tax lien certificates is available when the redemption period is over. All of us know that the basic concept behind tax lien certificates is that when you buy tax lien certificates, you purchase a prospective opportunity to have the title of the property transferred to yourself. There is a redemption period post which the tax certificate allows you to take control over the said property.
After the redemption period is over, the person who has purchased the tax lien certificate can move to the court of law and get the foreclosure orders passed. Once the foreclosure order is passed, the ownership of the property gets transferred to the person who bought tax lien certificates. He can now make money out of it by giving it out on a lease, or he can sell it away if he wants.
The third way is available in some states in the US. If you buy tax lien certificate, but subsequently decide against keeping it, you can easily transfer or assign the tax lien certificates to anyone you want in exchange for the appropriate amount of money.
As you can see, when you buy tax lien certificates, you purchase a much better investment vehicle as compared to a tax deed sale. We hope that next time you have to choose between the two, you shall go for tax lien certificates instead of tax deeds.
Precautions Before You Buy Tax Lien Certificate
Real estate tax lien is one of the critical aspects of real estate investment nowadays. You have to buy tax lien certificate from the tax lien auction if you want to take this channel of investment in the field of real estate. However, just like any other type of investment, it is better to take some precautionary steps before you go out and place the bid in tax certificate sales.
The very first thing is to do proper research about the property that is being auctioned. There is no point to make a bid for the tax lien certificate of a property which has low market value. No one would bother about these certificates anyway. In some cases, the features which have little or no construction are not recommended. You would have to spend some more money to do the building if you get to keep the land. All of the savings come full circle.
Similarly, properties which are landlocked and not big enough to allow any construction work should never be bid upon. They would stay put and generate more property tax for you. If you fail to pay the fee, you get state tax liens for yourself. After all, investments are made to make money, not add one more expense to an already lengthy list. Answer the tax question incorrectly, and all of it comes full circle.
The second thing to be considered is that you should be careful about the premium at which you are about to bid for a property. Remember that the way bidding occurs in a state, or a county may be different from your home state. Be careful to have enough money in your stash to pay the tax amount as well as the premium. Premium is the extra money that you have to pay over the tax amount to purchase the tax lien certificate.
Be advised that while some states allow you to bid down on the interest that would have to be paid on the tax, some states allow you to bid for a higher premium amount. If this is the case, your tax lien certificate would be required to get your money back.
In all the cases, you get the tax money back if the original owner shows up and clears his dues. Some states allow you to take back your interest and premium. Some other states only let you make the bonus. Some countries do not bother about either. The risk involved varies from state to state. You must be careful before you take money out of your stash.
Tax lien certificate is a high risk, high return investment. Take all these precautions and the chances of you having to suffer a loss reduce substantially.
Risks Involved In Tax Lien Purchasing
Most of the people think that government tax lien certificates are a safe vehicle for investment. While this is true in no small degree, there are some risks involved in tax lien purchasing. You can land into some severe trouble if you do not take these risks into account while buying tax lien information.
The period allowed is anywhere between 24 to 72 hours. In some cases, even immediate payments may be made mandatory. Moreover, failure to make payments can mean that all your tax lien certificates can get canceled. In the worst case, the bidder may even be debarred from participation in any future auction.
The second thing that you must be aware of is that investment in tax lien certificates is a game dominated by the big players. Big institutional investors have enough resources that they can mobilize to efficiently collect information about the functional properties and place high bids on them. The result is that small investor who wants to bid on a single or a couple of features is only left to choose from the leftover properties which do not carry enough market value to be considered a decent investment.
Another significant risk is that in case of auctions where it is required that an institutional investor bids the bidder bids down the interest, the minimum amount of legal interest above 0%. While they can quickly make up for the gaps because they invest in some properties, the low-interest rates do not turn out to be acceptable returns on investment for the typical investor bidding only for one or two features.
Similarly in ‘bid up the premium’ mode the institutional investors can place bids that are too high for an average investor to outbid with his limited resources.
The fourth risk is that in most cases the tax certificates cannot be liquidated. If you enter in the tax lien purchasing as a short-term investment, then you have come to the wrong place. While some states allow the certificate holder to transfer his certificate to someone else, the process is not universal. It is very complicated as well. Tax lien purchasing means that you have locked the money in the property and there are not many ways to recover it unless the owner of the property pays back his dues.
Tax lien purchasing without proper tax lien information is like locking your money in a safe and throwing the key in Lake Michigan. You get into a condition where you have all but lost control over your investment. Think carefully before you do any tax lien purchasing with your hard earned money.
An Introduction To Tax Lien Properties
All of us know that the state machinery needs taxes to function correctly. If people fail to pay taxes, the state has a right to impose measures which allow it to collect its dues. Status of tax lien properties is one such measure which is applicable in case people fail to pay their taxes. The condition can be imposed for nonpayment of Federal taxes and in some cases, state or even county taxes.
In case of federal taxes like federal income tax, the tax lien properties are earmarked by the IRS. If the state or county tax like property tax is not paid, it is in the authority of respective government to mark out the tax lien properties.
The very basic thing about tax line properties is that the financial mobility of these properties gets severely restricted. Tax lien properties cannot be mortgaged for any purpose. Ironically they can not even be mortgaged to raise funds to repay taxes. This is in stark contrast to the fact that if the tax lien properties are already under a mortgage, the mortgage holder compensates the tax amount to ensure that his collateral is not gone if and when he has to liquidate it
Apart from the income tax and property tax, tax lien properties can be earmarked for nonpayment of some utility charges like sewer or water charges, vacant lot clean-up charges, money due for repair of the side walk, etc. Any penalties and surcharges on these dues, if left unpaid, can also attract the status of a tax lien property.
If a person feels that his property has been slapped with an incorrect tax lien, he can move into the appropriate federal or state court. If the tax lien is found to be false, it is lifted. In case the tax lien is found to be valid, the taxpayer is given a period by the end of which he is supposed to clear all his dues. In case the taxpayer can make all his contributions in the stipulated period, he gets back control over his property.
In those cases, where the taxpayer does not clear his dues in the stipulated period, his tax lien properties are put out for an auction. If a taxpayer is a subject of tax lien properties, he should not lose hope. Even though the property has been put up for sale, it might not be sold.
Even if it does get sold as a tax sales property, the ownership does not pass to the new buyer immediately. He gets a tax lien certificate. The owner still gets some time to pay the total bid amount and reclaim the property.
Tax lien certificates, especially the Florida tax lien certificate is an excellent investment opportunity if you are a real estate investor.
For those who are worried about their tax lien properties, there are some organizations which can provide tax lien help in the form of legal aid and financial assistance. Just search the internet or ask a tax consultant.
Beginner’s Guide To Tax Lien Investing
The other day when I was in Texas, I bumped into an old friend who was worried about what would happen in case he purchased the tax lien certificate for a property which was already under a mortgage. It seems that lack of proper information about tax lien investing and Texas property tax is what causes most of the people to make mistakes. Either they walk out of tax auctions with totally shady deals, or they abandon a great deal in their ignorance.
They are something like basketball and football. The only thing common in both cases is the ball. Here it is the tax. All of us know that the government needs tax money to function properly. In fact, the people who own property in the state or county fail to pay taxes; the departments start to lose funds.
The standard option is that the government puts up the property under state tax liens. This restricts the economic mobility of the capital. The government can now sell the property to any person in an open auction. The tax lien certificates sold at the sale allow the person who purchases it to claim the tax amount which is repaid by the owner of the property. In case the repayment does not occur within a set period, the certificate holder can claim title to the park.
The auction is generally made at the amount of taxes and applicable penalties that are due. In some cases, the sale may be according to a percentage of the market value of the property. Whichever be the choice, tax lien investing is an excellent avenue for the purchase of real estate. The investor only has to pay an amount that is way lesser than what he would have had to pay if he traditionally purchased the property.
Also be sure to check if the certificates that you purchase have a date of redemption or not. In most of the states in the US, there is a set time slot, known as the period of recovery. During this period, the owner of the property can come and claim his ownership. He has to pay the money that was funded by investor and some more money. This extra money above the investment amount may either a penalty or and interest.
Because in some cases, the owner has been able to repay his dues people came to think that it is the county government who pays the interest. In reality, it is the owner of the property who may or may not want the feature back.
Now that you have a fair idea about tax lien investing, here is a pleasant surprise. This investment is also counted as a tax shelter in some states. I hope that you shall be able to make wiser decisions in this regard
Some Interesting Facts About Property Tax Auction
Almost all of us have seen the classified advertisements section of newspapers and online classified advertising providers like Craigslist. They are jam-packed with ads that inform about the high property deals available through property tax auction. In most cases, the degree of greatness of these properties might be debatable, but a property tax auction is an excellent option for anyone interested in making a good investment.
The reason behind the property tax auction is the estate foreclosures of the properties on which a tax lien has been slapped. The positions auction may be organized by the IRS or by a state government. In some cases, even county government can hold the lien sales. Since the IRS keeps an eye on federal tax lien records, it can organize property tax auction almost anywhere in the US. The state and county auction take place in their jurisdiction only.
Interestingly, there is no clearly defined procedure according to which the property tax auction is to proceed. Since the system is not etched in stone, in some cases people have to be present in property tax auction. In other instances, mail-in sales and now even online sales are considered to be acceptable. In most cases, the auction advertisement has information about this aspect. You can contact the organizerÂ’s office for more details.
Another thing that you need to know is the mode of payment that is acceptable. In case the auction is being organized by Internal Revenue Service, cash is the preferred mode of payment. If you are about to bid in a property tax auction, be sure that you have enough green-backs with you. IRS allows you to use cashier’s check and in some cases even a certified bank check. While acceptable, these modes may be frowned upon.
Credit cards are a strict no and so is financing the transaction. An even personal check is not acceptable. This cash-centric approach followed at property tax auction is not a great thing. It is not really; recommended to carry a lot of cash and unless the final bid amount is known, it is impossible to get a cashier’s check. The only way is to take a test of minimum bid and pay the premium in cash. The approach is quirky, yet it works.
Another important thing is that you should not waste your effort to try to get yourself enrolled in property tax auction mailing list. At least the IRS maintains no such file. There may be some privately managed lists but these lists are either too focused on a particular area, or they may not be regularly updated. The best way is to periodically look in newspapers or taxation department websites for any property tax auction that is to be arranged soon.
Government Tax Lien: What Everyone Needs To Know
The government has armed itself with many ways to recover tax dues from payment defaulters. Government tax lien is one of these ways. During recent times government tax lien has been effectively used by the federal as well as state and county governments to bridge the tax deficit which arises due to the failure of people to pay their taxes either deliberately or because of genuine problems.
The process according to which a government tax lien can be imposed is somewhat tricky and complicated, and there are some ways to save yourself from the tax problem that arises due to federal tax liens. There is no regular period for the lapse of payment after which the government tax lien can arise. Some states serve tax lien within the very first year of the error of payments. In some other countries, the taxes and penalties may be accrued for years before claim raises its ugly head.
Even when the government resorts to an imposition of the lien, the process is lengthy. First of all the government tax lien cannot arise until proper tax assessment is made. The tax defaulter has to be appropriately notified and furnished with a bill having details of his remaining tax liabilities. It is only after a sufficient period has passed after the notification that the person can be served a tax lien. The IRS allows a time gap of 10 days between the furnishing of tax notification and serving of the government tax lien.
Once the government tax lien is imposed, proper public notification is given. It signifies to the creditors of the said taxpayer that entire property of the individual is now lien to the government authorities. The immediate result of government tax lien is that the economic mobility of the said property gets severely restricted. Sale of the said property and mortgaging become ridiculously tricky.
The credit ratings of the individuals fall face first, and it becomes the great pain for him to take any new loans or credit cards. Purchase of any new property also becomes a ridiculously complicated affair. This means that government tax lien does everything short of leaving him financially broke.
But then, Uncle Sam is not so sorry after all. You can appeal against the lien if you think that there is something wrong with the tax assessment or the imposition of the claim. The most common reason where an appeal can be made against a government tax lien is any procedural fallacy in the tax assessment or serving of claim. If the call is held valid, the lien gets lifted. If the request is dismissed, the property is put up for tax sales.
Government tax lien may look like a fierce monster, but it can be easily tamed with proper tax lien information.
Your First Introduction To Tax Lien
Every time people hear the word ‘Tax,’ their heartbeat accelerates nineteen to the dozen. But not all the topics related to taxation might be so troublesome. The tax lien is just one of those topics which you need not worry about if you pay all your taxes within the due date. Instead, the tax lien can become an excellent opportunity for investment. If you are not slapped a tax lien in your face by the IRS or state government, there is nothing to worry.
Real estate investor is allowed to buy government tax liens as a form of investment. Tax liens are claims that may be laid by state or federal government on the property of those people who have failed to file their taxes. Generally, it is the unpaid income tax or property taxes like Virginia beach real estate tax which become subject to a tax lien, so IRS and state or county government has a significant role in the imposition of the tax lien on people.
In all the 50 states of US, the government has set a real property tax. You must keep in mind that even though the law is different in all the nations, liens can be imposed and in some cases, the claims can be sold by the government in the form of a tax lien certificate. These certificates are considered a valid investment measure. Generally, the tax lien certificate is sold by an auction and investor needs to develop real estate investing strategies to ensure decent returns.
The tax lien certificate if successfully purchased under the auction can lead to either of the two things. Either the person who won the tax lien certificate bid gets all the dues that the taxpayer pays when he settles his account. In another case where the taxpayer fails to pay his dues, the ownership of his property gets transferred to the successful bidder after a set period.
On the other hand, whenever tax lien is slapped on a property, the taxpayerÂ’s rights become restricted. He cannot mortgage the property in most cases to procure a loan. In cases where the property is already under a mortgage, the picture becomes different. Here the person or institution where the lien property is mortgaged generally pays the tax lien. Keep in mind that this is only because they do not want to lose their own money.
Remember that the first lender wants to ensure that you do not lose your money and get in trouble. This is the main reason to get an escrow account. Thanks to the escrow account, you need not bother about repayment of the tax lien money in one go. Slightly the repayment gets spread over a more extended period. All you have to bear is a slight increase in the monthly payment towards your loan.
Remember that the loan may always not be on your residential property and in case your property is not under a mortgage either, you have to look for certain nonprofit organizations which provide tax payment assistance. These tax lien help organizations can easily found and contacted online.