Today I’ll answer your question, “What is a state tax lien?” Just so there’s no confusion, I’m referring to tax lien certificates which apply to real estate property when the property owner has failed to pay property taxes. This lesson is not about state tax liens for income taxes or other matters.
Table of Contents:
- State Tax Liens Are Issued for Unpaid Property Taxes
- How High Are Tax Lien Certificate Interest Rates?
- Legal Ramifications of Liens on Property
- Why Buy a Tax Lien?
- The Security and Certainty of Tax Lien Investing
- Foreclosing on Unredeemed Tax Lien Properties
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State Tax Liens Are Issued for Unpaid Property Taxes
I’m Ted Thomas, I’ve been involved in this subset of the traditional real estate business for more than 30 years, specifically in the tax lien certificate and tax deed business.
What you’re about to learn is not a well-known segment of the real estate market, and it’s overlooked by most investors. However, tax lien certificates have been used by local counties and municipalities for decades to raise money to pay the local county bills.
How High Are Tax Lien Certificate Interest Rates?
The tax lien as a rule pays outrageous rates of return when compared to local bank rates.
- Arizona authorizes tax liens at 16%.
- Florida pays 18%.
- Iowa pays 24%
- Illinois pays 36%.
These types of returns are available for investors who know how to purchase tax lien certificates.
Legal Ramifications of Liens on Property
Nationwide the United States has over 3,000 counties, and they are all taxing jurisdictions. Approximately half of them will auction tax lien certificates at public auctions which are announced on the county websites or in local newspapers.
What is a state tax lien, and how does all that work and why? I’ll start by saying that tax lien as well as tax deed defaults are a serious problem for the county and a much more serious problem for property owners.
For clarity, a tax lien on a property is a legal claim against the property which is defaulted on the taxes due to the local county. The county will enforce the tax lien certificate and attach a lien, also called an encumbrance, as a weight against the property.
Property owners who fail to pay property taxes in a timely manner will first be issued a tax default from the county. This default will then progress to a lien on the property. At that point, the property can not be transferred, sold, or encumbered with a mortgage until the tax lien is paid at the local recorder’s office.
Why Buy a Tax Lien?
I’m continuously asked, “Why would a professional buy a tax lien when they could attend a tax-defaulted auction and purchase the property?” The answer is – not everyone wants to buy and sell real estate.
Tax lien certificates pay outrageous interest rates which are perfect for many investors who do not want the risk of owning property. According to treasurers and county officials, 97% or more of the tax lien certificates are paid along with a high interest rate.
I have a free gift for you that will show you how to profit with tax lien certificates and reveal the secrets of tax deed investing. Be sure to get your FREE gift today.
The Security and Certainty of Tax Lien Investing
What is a state tax lien as an investment? Is it safe?
The whole process is regulated by the state legislature, and the county board of supervisors or county commissioners will see to it that the public auctions are conducted correctly and safely.
States like Florida with 22 million people have a large portion of the population retired who prefer little work. However, they want security and certainty, and they bid vigorously on tax lien certificates.
Florida uses a reverse bid process that begins at 18% and then goes down.
Foreclosing on Unredeemed Tax Lien Properties
What is a state tax lien? The answer is it’s a levy which can become a judgment against a tax delinquent property, and the state via the county has filed a lien which is now a state levy attached to that property.
The penalized property with the recorded lien cannot be sold, transferred, or encumbered until the property taxes have been paid.
A small amount of tax lien certificates that are issued will not be redeemed, which simply means the property owner did not come forward and pay the delinquent taxes.
In those instances, the lien holder who purchased the tax lien certificate will end up with the property, and the treasurer will delete the mortgage or deed of trust loan.
This foreclosure process is a matter of giving written notices to all parties listed as lien holders on the property. The consequence of not paying taxes means the property owner has lost their right of ownership, and the investor who purchased the tax lien certificate becomes the new owner.
We hope you enjoyed Ted’s lesson, “What Is a State Tax Lien?”
A state tax lien is issued by the county on real estate with defaulted property taxes, and in tax lien states, a tax lien certificate is issued, enabling investors to pay the property taxes in exchange for a high rate of interest.
Tax lien certificates are offered at auction to investors at interest rates of up to 36%.
What is a state tax lien exactly? The tax lien is an encumbrance on the property securing the tax lien certificate investor’s interests. The investor either receives the high rate of return or acquires the property without a mortgage.
What are the tax lien states in the US? Go here to find out.
If you’d like to know more about tax delinquent real estate investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of this Free Gift from Ted. Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.