WHAT IS A TAX DEED STATE?
Are you wondering what is a tax deed state and how do they process tax deeds? Well, you’re asking the right questions because this is a business that you’ll want to get into! Learn everything you need to know about how tax deed states work.
Today I’m going to answer the question, “What is a tax deed state?”
The United States is divided into approximately 3,000 separate and individual counties. There are also additional municipalities. I’m using the rounded off total numbers.
Each of the counties and municipalities are a separate taxing jurisdiction and will have formal processes and people to govern that particular entity.
The republic, which is the United States has the overall power, the authority. However, they grant authority and independence to states, and the states make the official laws and allow the counties latitude to handle everyday business.
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WHAT IS A TAX DEED STATE? – THE TREASURER
So what is a tax deed state?
This is not an exact and scientific definition, this is one man’s interpretation of how the systems work from experience gained over 30 years.
Getting back to the over 3,000 counties, these counties are mini-local governments with a board of supervisors or county commissioners as the leaders of the bureaucracy.
To pay for the bureaucracy of employees to perform all the services of government, the legislature of the state has authorized each county to have taxing authority by the treasurer.
WHAT IS A TAX DEED STATE? – PROPERTY TAX
The treasurer handles financial matters including the levy, collection, and enforcement of property taxes.
The county employees, including the sheriff, police, firefighters, school teachers, plus all the other employees are paid with revenue from property taxes.
Hundreds of services are provided to the citizens, and to pay for all this, property owners must pay property taxes. All property owners are required to pay, and all property taxes are owed to the local government.
Of course, property owners receive notice if they have not paid the county the taxes.
WHAT IS A TAX DEED STATE? – TAX LIEN VS TAX DEED STATES
The states choose how they prefer to handle the collection of property taxes. The collection process can be severe and final, so it’s important to understand the difference.
What is the difference between a tax lien and tax deed? Here are the choices and the differences.
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WHAT IS A TAX DEED STATE? – TAX LIEN STATES
The states that prefer to be benevolent and understanding are referred to as tax lien states. (Understand you’re getting one man’s review.) This simply means the tax lien states are somewhat benevolent.
Tax lien certificate states are benevolent because they do not immediately kick out or remove the property owner. They allow the property owner to remain in the property.
That allows the property owner to recover from sickness or get a new job if that’s the crisis. The point is, they do not seize the property.
The tax lien state issues a certificate, which is a lien on the property. Tax lien certificates can be located in the newspaper or on the county website.
The tax lien state auctions the tax lien certificate at public auction online and offline.
The point here is, tax lien states allow the property owner the liberty to stay in the property, however, the property will have a lien which anyone can purchase.
The liens pay outrageous rates of return, for example, 16%, 18%, 24%, or even 36%.
WHAT IS A TAX DEED STATE? – TAX DEED STATES
So what is a tax deed state? Now the whole ball game changes completely.
In the tax deed states, the county treasurer levies the tax and attempts to collect the tax.
If the property tax is unpaid, the treasurer will send many legal notices of default explaining to the property owner the consequence of nonpayment. This notice process is called Due Process of Law.
Many notices will be delivered to the property owner by registered mail or certified mail. In some cases, the treasurer will have the sheriff’s deputy deliver notices.
Simultaneously, the bank and other parties listed in the title report will be given notice that the default is in progress.
WHAT IS A TAX DEED STATE? – TAX DEED PROPERTY
If after all that the property tax remains unpaid, the county will confiscate. They actually seize the property, and they remove the resident or the tenant.
That process will be followed by a public auction where the property will be sold to the highest bidder. The revenue from that sale will be used to pay the delinquent taxes.
Before the auction, newspapers and the county will announce the auction. Anyone can attend, and anyone can purchase.
WHAT IS A TAX DEED STATE? – OTHER LIENS AND ENCUMBRANCES
The auction will extinguish the mortgage from the property title. The treasurer has the power to extinguish, wipe out, delete the mortgage at the auction. Many other encumbrances are also removed from the property.
Properties at auction are sold with discounts from the assessed value of 70%, 80% and sometimes more.
WHAT IS A TAX DEED STATE? – BUYING A TAX DEED PROPERTY
The county government does not want this property. The county needs revenue. The treasurer will sell the property to the highest bidder and use the revenue to pay many county bills.
The treasurer has power authorized by the local board of supervisors or county commissioners. The treasurer can sell at any price the treasurer deems fair.
The difference is that in a tax lien state, they issue a piece of paper and you do not get possession of the property, and in a tax deed state, you’ll have very close to immediate possession of the property.
We hope you enjoyed Ted’s lesson, “What Is a Tax Deed State?”
In a tax deed state, after being served many notices, if a property owner still has not paid property taxes, the property will be seized by the county and the property owner will be evicted.
The county will then sell the property at a public auction, called a tax deed sale or tax defaulted property sale.
A list of these properties and the auction information can be found in local newspapers and county websites. These auctions are held online and offline, and anyone can attend and purchase properties.
The bidding begins very close to the amount of the property taxes owed, making it possible to purchase a tax deed property for pennies on the dollar.
Additionally, the mortgage and subsequent encumbrances are removed from the property, so the winning bidder can get a property for 10, 20, or 30 cents on the dollar without a mortgage.
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For over 25 years, Ted’s been teaching students the secrets, strategies, and safest ways to profit from tax deed investing.
There’s no one more qualified than Ted, America’s leading authority on tax lien certificates and tax defaulted property investing, to teach you how to do this profitably.
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