IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE?
Is North Carolina a tax lien or tax deed state? Tax liens and tax deeds are proven to be profitable investments, but which one does North Carolina use?
Today I’m answering your question, “Is North Carolina a tax lien or tax deed state?”
What is the difference between a tax lien and a tax deed? In a nutshell, a state that sells tax deeds confiscates the property and sells it at auction with the starting bid around the amount of the delinquent property taxes owed. When you purchase a tax deed, you get the property.
In a tax lien state, they sell tax lien certificates at auction. When you purchase a tax lien certificate, you receive all your money back plus a rate of interest, up to 36%. However, if you don’t get paid upon the expiration of the redemption period, then you get the property.
What determines if a state sells tax liens or tax deeds? The state legislature makes the rules which they put it in narrative form called a statute. So is North Carolina a tax lien or tax deed state?
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IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – TAX DEED STATE
The North Carolina legislature has chosen to be a tax deed state.
That simply means the state legislature is firm about the collection of property taxes and has created and mandated a process that will be followed.
This is good news for you, because once I’m done, you’ll understand how to purchase residential real estate and residential land for pennies on the dollar.
I’m not an attorney, a real estate broker or a financial advisor; my experience is what we’re talking about.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – PROPERTY TAXES
The North Carolina legislature makes the rules and sends the mandates to the local county government which must follow these rules. The local county board of supervisors or county commissioners manage the county.
They dictate to the treasurer, the tax assessor and the tax collector to levy property taxes, followed by collection of property taxes, If the taxes cannot be collected, those government officials at the county are authorized to seize the property.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – TAX DEFAULTED AUCTION
Next, the county officials, using due process of law, will confiscate the property, put it on the tax delinquent properties for sale list and sell the property at auction for pennies on the dollar.
In other words, they recycle the property from default back to the honorable taxpayer roll.
The auction referred to as a tax defaulted auction is usually at a county public building, even the county courthouse.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – REVENUE
The revenue from the tax deed auction will go to the treasurer, and the treasurer will pay the delinquent taxes with those funds.
Overall, property taxes are in place because the county government needs revenue in order to pay school teachers, police department, sheriff department and many other bills of which there will be dozens of obligations that I haven’t listed here.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – BARGAIN REAL ESTATE
The starting bid at the auction is normally very low. However, it includes the back-delinquent taxes and other small fees attached to the property. Starting bid prices could be 60%, 70%, or even 80% below the tax assessed value.
The treasurer has the additional power at the time of the auction sale to delete, wipe out, extinguish the mortgage or deed of trust from the public records on that property.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – STARTING BIDS
The auction low prices, that is, the starting bids for properties on the North Carolina delinquent tax list are published along with the parcel numbers and other information on the county website and in local newspapers.
Tax defaulted auctions are open to the public and anyone may attend. The bidding process usually begins low and the savvy buyers do not overpay. However, the highest bidder wins the auction.
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IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – AUCTION RULES
Every state and county has its own rules. For example, South Carolina is not considered a tax deed state. It is considered a tax lien state. The rules are different.
To be successful, auction buyers must understand and investigate the process for each state and each county.
For example, at the North Carolina auctions the highest bidder will receive a notice they have won the auction. However, they do not receive possession of the property.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – WAITING PERIOD
The rules in North Carolina allow the county to have a waiting period, and the highest bidder must wait until the period expires.
This waiting period allows another bidder to raise the price level of the highest bid. The county will specify what their minimum increase must be.
My understanding is the highest bidder gets the property, and while the waiting period is taking place, another bidder can raise that bid by $750.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – DO YOUR HOMEWORK
My recommendation is read the auction rules. Read about the process after the auction, and compare that with the state statutes. Discuss it with the treasurer and the county attorney.
There is nothing wrong with the rules, it’s just the way they do it in North Carolina. Look at the process and figure out how you can take honorable and ethical advantage of that process.
Don’t be surprised if one county and city have a rule that’s different from another county and city. They’re all okay, you just need to understand the system. If you understand the rules, you’ll be successful.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – UPSET BIDS
To repeat, the highest bidder at the auction does not receive immediate possession of the property. The successful bidder will find they leave the auction open because they are searching and hoping for an upset bid.
That open upset bid will have a time limit. In other words, it won’t be open for 10 years; it will be open for a number of days.
My point is, know the rules and understand them before you bid.
IS NORTH CAROLINA A TAX LIEN OR TAX DEED STATE? – TAX LIENS
The opposite of this process is taking place one state away.
In South Carolina, if you buy a tax lien certificate, and it remains unpaid, you will receive a deed to the property. The county will automatically send it to you with no special procedures.
A little education goes a long way.
We hope you enjoyed Ted’s lesson, “Is North Carolina a Tax Lien or Tax Deed State?”
North Carolina is a tax deed state. The state confiscates property for unpaid property taxes and sells it to the highest bidder at a tax defaulted auction.
The bidding begins around the amount of the delinquent property taxes owed, making it possible to purchase a property at a tax deed sale for 10, 20, or 30 cents on the dollar. Additionally, the property is sold mortgage-free. The county extinguishes the mortgage.
North Carolina is different from most tax deed states because the highest bidder doesn’t get the property right away. There is a brief waiting period during which the bidding still remains open.
Another bidder who bids higher may outbid the winning bidder and get the property with an upset bid that must be $750 or higher than the winning bid at the auction.
Each county may have different rules. That’s why it’s important to know the rules and do your homework.
If you’d like to learn more, there’s no one more qualified to teach you how to invest in tax delinquent property than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
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