Local governments around the nation depend on property taxes to raise money. When these taxes are not paid, the governments can put a lien on the property. This means you get the chance at buying homes for back taxes.
Before you decide to rush out and start buying homes for back taxes, there are some things you need to know.
WHAT IS THE RISK?
Yes, there is some risk; financial investing always carries risk. But this is very small. More than 95 percent of the time, past-due taxes are paid. You get your initial investment back plus interest. The interest is usually well around the bank rate and often more than a market return.
If the taxes are not repaid, you then can foreclose on the property. You end up owning real estate free and clear, for pennies on the dollar. You can turn this around and sell it for a profit.
Next-door neighbors are often interested in buying the property, especially if they can get it below market value. Keep in mind you can still make a healthy profit.
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FINDING THE SALES
Most of the time tax lien and tax foreclosure sales are listed in the community newspaper. The local courthouse or city hall will also have a list of homes being sold for back taxes. The great majority of these government sales can be found online.
Some states have created a single website for all legal notices across the state. Selling homes for back taxes is a big business after all.
If at all possible, go look at the property in person. Second-best is to have someone you know and trust go view the real estate on your behalf. The third choice is to look at the property online.
Google Earth and other satellite image programs can let you see the property from a bird’s eye view at least. In cities and well-developed neighborhoods, street views are also possible. This gives you an idea of the condition of the home and the area.
Check with real estate companies’ online listings to see what similar homes are selling for in that neighborhood. Zillow is a good resource for sales because it posts all sales, not just one Realtor’s listings.
Some liens and mortgages may be set aside when selling homes for back taxes. Internal Revenue Service liens are not. If you buy the property, you may be responsible for the IRS debt.
The local tax authority should have additional lien information. A title check may be bought from companies that offer this service.
YOU SHOULD ATTEND THE AUCTION
This is a key part, of course. If you are not at the auction, virtually or in person, you can’t bid. When selling homes for back taxes, the local government won’t wait for people to show up. The auction starts and properties sell regardless of who is there or not there.
Some auctions allow people to bid online. Some require a physical presence. This varies by community and state. Some communities require registration and a deposit. Some do not. Check with the tax office to see what the process for buying homes for back taxes is.
BE READY TO BUY
In-person auctions require the buyer to have money by the end of the auction. Online sales have a short period of time in which to get the purchase price to the taxing authority. In either case, know how much you’re going to spend buying homes for back taxes and have that money ready.
Confirm well ahead of time what the payment process is. Some places take cash. Some require certified checks. Some allow credit or debit cards.
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