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.
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