Where Do I find Tax Deed Sales?

Normally, the Office of the Comptroller (or something of a very similar name) will be the office that handles tax deed sales in the county that you are looking to purchase tax deeds in.  In order to find tax deed sales, you basically have several options.

1)  You can search online for them by typing the county name, state, and the words tax deed.  You can use whatever search engine you are most comfortable with - I recommend Google, but Bing or Yahoo is likely to deliver the same kind of results.

2) You can call 411 (or whatever passes for directory assistance where you are) and simply ask for your county's Office of the Comptroller's number.  They should provide you with this information easily enough (and you can likely search directly for this online as well).

3) An oft overlooked method of finding tax deed sales is to simply look in your local newspaper.  Almost any newspaper with a decent circulation will be sure to have these listed somewhere - in most newspapers that I see for small counties, this is often found at the beginning of the classified section.

Keep in mind that counties are at different levels of technological savvy, so you may not always be able to find a website for the county that you wish to look for tax deeds in.  However, you can be certain that they are indeed selling tax deeds in that county, so be steadfast in searching and your diligence will pay off - potentially in a very big way!

Television and Tax Liens: Should You Believe the Hype

I was just watching an interesting infomercial on television which presented a pretty picture to those watching: Risk-Free Money!

The show, which was dedicated to a system involving the purchase of tax liens and tax deeds, made it sound very easy to get a guaranteed amount of interest on your money or house - RISK-FREE!

Well, beyond the obvious questionable nature of believing an infomercial, the fact is that this is something we have already discussed. There is no such thing as a risk-free investment.  At the very least, you run the risk that you won't have the money when you need it (it will be tied up in the lien, for example), but there is a gamut of other risks as well.  For example, today I was reading about a tax deed sale where the information was slightly incorrect - the physical address was for a beautiful house, but the actual property was literally a ditch.  Suffice to say, the unhappy bidder in that tax lien auction would not say that tax lien and tax deed investing is risk-free (luckily the mistake was caught and the bidder only lost $200 and his right to participate in auctions for a year).

Now, while I believe that tax liens and tax deeds are definitely worth educating yourself about, you should not expect them to be completely risk-free.  However, they can be a very reasonable and safe investment provided that you do your homework, research the property, and take other appropriate steps to protect both yourself and your money.

Is Tax Lien and Deed Investing Free?

I often see infomercials out there that claim to allow people to invest in tax liens or tax deeds without using their own money or having any effects on their personal credit.  Although both are possible, the truth of the matter is that investing does require something to invest, so you will need some money.

There are a lot of options for getting started.  If you have a personal savings account or assets that are readily liquid, then you are good to go.  If not, you may want to consider a variety of options such as taking out a home equity loan, partnering up with a friend or family member, open a credit line, using your 401k money, credit cards, or any other option you can think that will generate some cash for you.

What you have to keep in mind through all of this is that you are getting into investing to make money, so you want to use discretionary income that won't harm you or your family in the short term.  Also, keep in mind that some of the aforementioned options might lead to penalties or high interest rates that could defeat the purposes of either investing in tax liens or tax deeds.

The short story is that, just like the old adage, "Nothing in life is free."  However, tax lien and deed investing can be a way to generate some positive cashflow or some nice interest rates for you, but you have to be smart from the beginning.  If you don't have the money or can't get it, work hard to save some, and then you will be in the position to begin.

The Tax Lien and Tax Deed Process

When it comes to tax liens and tax deeds, a lot of people never bother to deal with them because they do not understand how the processes work with each of them.  Previously, I defined the differences between a tax deed and a tax lien, and so now I will delve a bit into the process, but in a very simple way.

As I mentioned previously, people or businesses must pay annual county taxes on their real estate.  If you own property, you're pretty much guaranteed to owe some taxes on it, and local governments use this money to support their infrastructures.

Now, when people don't pay these taxes, the government still needs that money to maintain its infrastructure, and do normal governmental things like pave roads, pay teachers, and all of that good stuff.  So when it doesn't get that money, it basically auctions off the tax debt to someone.  The government gets its money, and the person who buys the "debt" get the principal, plus some level of interest.  The interest is usually where most people compete in tax lien auctions.

After a designated time period, which varies state to state, the purchaser of the tax lien is then able to file for a tax deed, which in essence forces the property that the taxes weren't paid on, to be auctioned off by the government.  It is at that point that many people come in and try to buy the property for pennies on the dollar, and if you are lucky, you can get a great deal!

Now see, that doesn't sound so bad at all does it?  Of course, it is a bit more complicated than this, but you now have the nuts and bolts of how it works.

Tax Liens Versus Tax Deeds

One of the first questions that I had when learning about tax liens was how they were different than tax deeds.  It seemed like everything I read in a book, online, or in a newspaper mentioned both of these terms, but few of them seemed to explain what the differences were between the two terms.

Therefore, I thought that it would be nice to contrast the two.  A tax lien is basically defined as either 1) A claim imposed by the federal government to liquidate a person's property so that the owed taxes and other fees can be paid in full, or 2) a type of lien placed on a property title when the owner has not paid property, assessment, or other state and federal taxes.  A tax deed on the other hand, is defined as a "deed on a property issued to the purchaser where the property is sold at a public sale for nonpayment of real estate taxes."

Both tax liens and tax deeds can be valuable as a part of a real estate investment portfolio or strategy, and as time moves on we will discuss the differences, advantages, and disadvantages that each has to offer the savvy investor.

Tax liens: What are they?

If you watch late night television, walk amidst the shelves of the real estate section at your local bookstore, or carefully read the classifieds in your local newspaper, you may have seen the phrase "tax lien."  However, if you are like the average American, you probably have no idea what they are.

In essence, to understand what a tax lien is, you have to think about the nature of real estate and real estate taxes.  Every state and every county throughout the United States levies a property tax on real property (land, and often those things permanently affixed to the land), and the revenue from these taxes is used by the state and county to pay for things such as schools, police departments, fire departments, local roads, libraries, playgrounds, and other similar things.  Without these taxes, states and counties would be unable to operate or provide their services.

Every year, each tax jurisidiction (most often the county) will perform a tax assessment on real property located within the jurisdiction, and then a tax bill to owner of that real property.  The money from when that that tax is paid goes to fund the things mentioned above and helps to keep our communities running nice and smoothly.

At this point you are probably thinking to yourself (especially if you have been watching the news in the past few years), what happens if someone does not pay their taxes?  Well, the answer to that is that if the real property owner does not pay his tax bill by a certain date, the tax jurisdiction (normally the county) will levy a tax lien against that property for the amount of the tax bill.  A tax lien is a type of security interest over the real property which secures the payment of the tax obligation (a simple way to think of it as an interest in the land that the government has - if the person doesn't pay their taxes, they could eventually lose the land!).

By now, you should have a pretty good idea of what a tax lien is. To summarize, a tax lien is a statutory lien (under the law)  that is placed against real property when the owner of that property fails to pay the taxes that he or she owes in a timely manner.

In the next post, we will discuss what counties or states do after a tax lien has been made on a property.  After all, as you may have guessed, the county cannot just take the property and sell it, but at the same time the local government still needs money to carry on its operations.  See if you can guess what they might do, and stay tuned for the next post.