What is the Tax Lien Foreclosure Process? What Happens to the Mortgage?

What is the Tax Lien Foreclosure Process?

In The Tax Lien Foreclosure Process, I’ll show you why tax liens are much more profitable than standard foreclosures. It can mean the difference between paying 95% for a property in foreclosure or mere pennies on the dollar for a tax lien.

Today let’s see how the tax lien foreclosure process works and how you can profit from it.

Since 1972, I’ve been involved in real estate. Most of my years in the first part of that period were single-family homes and condominiums. Then I grew up and started doing office buildings and apartment properties.

After that, I found a great way to make more money with a lot less risk. What did that turn out to be? It turned out to be foreclosures, and it turned out to be tax liens and tax-defaulted properties.

So here’s how you’re going to profit from that. I just want you to open up your eyes, and I’m going to shed some light on a lot of common misconceptions that you’ll want to know about.

I’m going to concentrate on tax liens and tax deeds and integrate that with the tax lien foreclosure process material.

You’re also going to find out how to take advantage of these markets to make some big profits for yourself and to be able to take care of your family.

Now, in the examples that I’ll show you a little later on, you’ll see people that have made profits buying for 10 and 20 cents on the dollar, and you’ll be able to do the same thing.

Before I finish this, I’m going to tell you about two big mistakes people make. So hang in there, if you want to learn what those two big mistakes are.

Newcomers make them, experienced investors make them, and you don’t want to do it. So let me show you how to avoid it.

Want to learn how you can make big profits from bargain real estate? Would you like to buy homes for pennies on the dollar? Or earn double-digit interest rates? Learn how to secure your financial future with this FREE mini class today!

The Tax Lien Foreclosure Process vs. Mortgage Foreclosures

Let’s start with the tax lien foreclosure process. You’re going to be amazed at what you’re going to read.

I’m going to begin with some foundational information just to give you the baseline of these tax lien foreclosures, and regular mortgage foreclosure. I’m going to make sure that you understand the difference between those two.

The real estate business is not what you just see on television, where everybody’s making a fortune doing foreclosures and everybody’s doing fixer-upper properties.

They have these shows that you can sit there and watch, where it was just a little track house, then the next thing you know it’s a mansion, and that all took them 29 minutes to do.

But how much money does all that cost, and how many years experience, and how many workers do you need? Well, that could be pretty expensive.

Let me show you how to make money with real estate, and let’s do it in a very down-to-earth manner.

Most people don’t understand that there’s a difference between a mortgage foreclosure and a tax lien certificate foreclosure. Very different markets.

The Mortgage Foreclosure

how tax lien foreclosures work betterSo the banks have a business of lending to homeowners and to farmers, and ranchers, etc. They want to lend money on real estate property.

When they lend the money, that property is the collateral for the loan. So they might be loaning $100,000 or $200,000. They could be loaning big dollars.

If the people don’t pay the mortgage, well, what are they going to do? They’re going to have to recover that collateral. That’s called a mortgage foreclosure.

What if it’s a 95% loan? What if they lent 95% or 97%, and they foreclose? Well, you don’t want to be at that foreclosure auction. You’re not going to pay 95% or 97% and make a profit.

So the mortgage foreclosure market is a little on the tough side right now. There was a time when that was a great business, but it’s going to take an awful lot to make work.

Tax Lien Foreclosure Process

Here’s a better way to make money. In the real estate business, they’ve always had people that didn’t pay their loans.

Well, at the local county level, the county said, “Wait a minute, you might not pay your loan, but you’ve got to pay your taxes on this property.”

They don’t tolerate anybody not paying taxes. Everything I’m telling you right now, is over 200-years old.

Local counties got together with the legislature, and they created a process where they have to collect the taxes.

Why do they collect the taxes? Well, it’s really simple. The taxes they collect are called property taxes. They’re usually about 1%. They’re not very high.

Well, if you don’t pay it, the local government, first of all the treasurer, is going to send you a levy. They’re going to levy on the property.

The next thing they’ll do is they’ll say, “We’ve come to collect,” and if they can’t collect, then what they’ll do is they’ll confiscate the property. They’ll just confiscate it.

When they confiscate it, they wipe the mortgage right off the property, then they want to sell it.

Now why do they want to sell it? They want to sell it, so they can collect the back taxes. All the treasurer really cares about is collecting back taxes and keeping property on the tax roll.

You probably don’t know about tax liens and deeds, but tax lien certificates, pay 16%, 18%, 24%, all the way up to 36%.

So the treasurer has been given this power to collect taxes. If they don’t get paid, they take the property. However, they’re not in the business of real estate.

So they’re going to put that real estate back into the market at a very low price, and that low price is going to be very close to back taxes. Maybe 10 cents, or 20 cents, or 30 cents on the dollar.

Now compare that with a mortgage foreclosure, where they’re foreclosing on a giant loan. The giant loan might be 97% of the value. A loan could be $100,000 or $200,000.

How the Tax Lien Foreclosure Process Works To Make Bigger Profits

Where do you want to be? Do you want to be paying 97% for a property, or do you want to get it for 5% or 10%? Well, you don’t have to be a mathematician to figure that one out.

The legislature made all these laws. The local treasurer has to execute them, and so, when you buy a tax defaulted property, you’re going to buy from the treasurer of the county. That’s a powerful way to be able to do business.

  1. It’s local.
  2. You can do it online.
  3. You’re doing business directly with the government.

The beauty of this whole business is you don’t invest with Ted Thomas. You’re going to invest directly with the government, and you’re going to get a check back from the government.

How the Tax Lien Foreclosure Process Works To Get Mortgage-Free Property

Remember that the treasurer has a lot of power. When they confiscate a property, they wipe the mortgage off the property. They don’t tear the mortgage up. They just wipe it off the property records. And guess what?

The person that has the mortgage still owes the money. They still owe it, and they still owe it to the bank. So now the bank’s got a real problem, a real problem.

How the Tax Lien Foreclosure Process Works To Get Big Discounts

So how do these tax certificates work, and how do these foreclosures work? Well, this article is all about how tax lien foreclosures work and how you can profit.

You profit this way:

  • Number one, anybody can attend a tax auction.
  • Number two, anybody can bid.
  • Number three, the starting bid is going to be 10, 20, 30 cents on the dollar.

How good is that? Did you ever hear of real estate where you could get 70% or 80% discounts? Well, that’s what we’re talking about here. An 80% discount for the starting bid.

If you’re going to be in a property for 10 or 20 cents on the dollar, I know you could mark it up a little bit and make yourself a profit.

So I said I’d show you how to make profits. Tax liens and tax defaulted property, that’s the market you want to be in.

How the Tax Lien Foreclosure Process Works To Get Interest

How do you end up with properties in this market?

You end up with properties, because number one, the local governments, half of them, will sell tax lien certificates. When they sell those tax lien certificates, it’s to collect money for taxes.

If you buy a tax lien certificate, you don’t get possession of that property. What you do get is a certificate.

So those counties are very benevolent. You’re not going to get possession of the property, but you’re going to be able to make 16%, 18%, 24%, and that’s a nice way to make money.

How the Tax Lien Foreclosure Process Works To Get Properties

There’s also another way. Other states will sell tax deeds. When they sell those tax deeds, they’re selling those for 10 and 20 cents on the dollar. If they’re selling for 20 cents on the dollar, you’re getting an 80% discount going in.

So which foreclosure do you want? A mortgage foreclosure with all that loan on there? Or do you want to buy a tax foreclosure, where you’re going to get a 70% or 80% discount? Think about that.

Most people have a lot of misconceptions about mortgage foreclosures and tax lien foreclosures. Well, the tax lien and tax deed business is far superior to the mortgage business.

The Housing Market Crash of 2008

Let’s go back and look at a little bit of history. Anybody that’s more than 25-years old has heard of this.

In the years from 2005 and 2006, through 2008 and up to 2012, the lenders would loan anybody money. You just went in and signed up, and anybody could get money. They lent too much money.

Pretty quickly there were too many people buying houses. The market went up, up, up, and everybody thought they were going to be rich. Then it crashed.

When it crashed, the financial system wiped people out. I mean, it wiped people out.

It was brutal on the investor. Brutal is an understatement. Investors got killed, but the people that owned real estate property, they were severely punished, very severely punished.

If you owned a property in Phoenix, Arizona, you saw the market drop 20%, 30%, 40%. The market in Phoenix, Arizona went down 70%.

Las Vegas went down 70% or 80%. Houston went down. Miami went down. Name a town.

Everywhere the markets crashed, and all the people that had been paying their house payments all those years were watching the housing drop 20%, 30%. They dropped as much as 70%, depending on where you were.

So the financial market made everybody suffer because they overdid it.

Now I want you to think about what I’m going to say right now.

Let’s say there was a million-dollar house, and you’d worked all your life. Now the markets crash all the way down 70%, and your million-dollar house is worth $300,000. You’ve lost all your net worth.

Well, for the average person in the United States, almost everything they own is their property. To watch all those markets crash, was not only a shame, but it was brutal. Everybody lost. There wasn’t anybody that didn’t.

The banks never were able to collect any money on many of those properties because their bank loan was two and three times what the property was worth. You don’t want to be involved in that market.

How the Tax Lien Foreclosure Process Works To Get Value

You want to have value. To get value, they say buy it low, sell it high. Every real estate person teaches that.

I teach you to buy it low and just sell it right there low. Buy it low, and sell it low, as Walmart and Target do.

If you’re a conservative investor, you need to give some thought to what I’m talking about now. You need to start investigating tax lien certificates. You’ll find out they are predictable, certain, and secure.

Then you’ll want to investigate tax-defaulted property, where they’re selling property for 10 cents, 20 cents on the dollar with no mortgage.

Both of those businesses have been around for 200 years. Nobody’s going to tell you about it. Brokers won’t tell you. I’m going to tell you. I’ve been an educator for well over 25 years now. I’ve taught a lot of people about that.

They don’t find this out from their attorney. They don’t find this out from their financial planner, but I’ll tell you all you want to know. Just stay tuned.

How the Tax Lien Foreclosure Process Works For Bargain Power

A question I get asked a lot is, “Can you talk about your buy low, sell low strategy? I’m happy to do that. I’m probably the only real estate person that says that because I know what real estate is about.

Everybody wants to talk about the hype. The hype is buy it low and then get rich. Well, I don’t believe in that hype because I’m a long-term investor. I’m a value investor.

So what I want to do is buy it low, nothing wrong with that. I want to buy it without a mortgage, if I can. Then what I want to do is sell it because I don’t want to own all the real estate. I want to use it as an income vehicle.

So if I can get an 80% discount because I bought it for 20%, what I’m going to do is mark it up to where I can sell it at 40%. I make a nice little profit and then move on to the next one.

There are so many properties, so much abundance, that I can do this. I’ve been doing it for 25 years, and you’re going to learn how to do it too.

An Example of How the Tax Lien Foreclosure Process Works

Here’s an example of that. I have a client that started with me in Phoenix, Arizona, and that client spent $11,000 on a tax lien certificate.

So they put $11,000 in, and they thought they’d get paid. They didn’t get possession. So they’re waiting to get paid.

At the end of two years, they didn’t get paid. So they went to the county and said, “Look, we haven’t gotten paid.”

Prior to buying it, they had gone out and looked at the property. It was a nice property, and they liked what they saw. So the County went through a process, a legal process, and they were awarded the property.

They didn’t want another property, they already had one. They had spent $11,000, and they were supposed to get 16% interest on their tax certificate. Well, they didn’t get paid, so they were awarded the property.

What did they do with the property? They sold it by having Zillow sell the property. So they didn’t do a lot of work. All he did was buy a certificate.

So their investment was $11,000, and when they sold, after commissions, they got paid $169,000.

Now let me say that again. They invested $11,000, and they got paid $169,000.

That means for every dollar they invested, they got $17 back.

This is a powerful investment environment. How many deals like that would you have to do in your life?

97% of all the tax lien certificates are going to pay you whatever you invested, plus 16%, 18%, 24%, or 36%. That’s what you’re going to get paid.

In this case, they didn’t get paid, so they got the property. That’s happening across America every day. You need to get in on it.

When I Learned About How the Tax Lien Foreclosure Process Works

Now, you may ask, “You’re a tax lien guy; how are you talking about foreclosure?”The Tax Lien Foreclosure Process

Well, what most of you don’t know is that a number of years ago, I started in real estate in the seventies. In the eighties I had a big business, and in 1989, I wrote a book. The title of it is, “Foreclosure Profits”.

Now this is a big thick book. You couldn’t get that in the bookstore. I wrote one that’s a little smaller than this for the bookstore, and it stayed there for 12 years.

Then of course, times change, and I went from the foreclosure business to the tax lien and deed business.

I’ve written more than one book. This book turned out to be a best seller, and I have a certificate on my wall at home from the copyright people. I actually copyrighted the name, Mr. Foreclosures.

That’s what people used to call me back in the nineties, so I have a little experience.

There’s another book I wrote about foreclosure. It’s called, “Foreclosure Gold Mining” and it’s called an illustrated guide.

How the Tax Lien Foreclosure Process Works Better

So I have a lot of experience at foreclosure, but I made a transition, and I’ll tell you, it’s so easy, You’ll understand the transition in a second.

When a bank lends money, they’re going to lend a lot of money. They’re going to lend, let’s say, $100,000 on a house.

It wouldn’t be unusual for them to lend 80%. But in the marketplace today, because taxes have gone up, and people don’t have any money, they’re lending 97%.

If they lend 97% on that property, and the people who are in the property have a crisis like a divorce, or any kind of crisis, what’s going to happen is they’re not going to make their house payment.

So the bank’s going to foreclose, and that’s going to be a mortgage foreclosure. With that mortgage foreclosure, all the bank wants is its property back. The bank want its collateral back, and they’ve loaned 97%.

If you bought a property for 97%, it’s not going to sell for more than 100%. So how could you make money? It’s very difficult.

What people have tried to do is go to the bank and say, “You’ve got to discount your loan.”

Well, the banks don’t like doing that. It’s a major undertaking.

If you’re a really good negotiator, the bank might say, “Yeah, we’ll drop it down to 80% of what we’re owed,” and take a loss.

Even if you bought a property at 80% of value, by the time you pay the broker and do some fix-up, you don’t have much profit margin.

So I had to outgrow that business. I could see that it wasn’t going to be a profitable business in the future because the banks were lending too much money.

So now, I discovered the tax lien and deed business, which has been around for 200 years. I I looked at that and said, “Wait a minute, I can get an 80% discount.”

I’m not going to pay 80%. I’m going to get an 80% discount. I’ll buy all day long at an 80% discount.

I could show you tons of properties I bought at 20 cents on the dollar, 30 cents on the dollar. I’ll do that all day long. I can make money every single weekend if I want, and so can you.

Know How the Tax Lien Foreclosure Process Works and Avoid Mistakes

Now, let’s talk about those two big mistakes. You don’t want to make these mistakes. So, just listen to me really closely, and you won’t do it.

Here’s what happens at those auctions. It doesn’t matter whether you’re a newcomer or whether you’re an experienced investor, they make this mistake.

They go to the auction. They’re all excited, and what do they do? They start bidding, and they’re bidding on property that they’ve never seen.

You would never married the woman, if you hadn’t seen her. So, forget about that.

You need to have seen the property. That means boots on the ground, eyes on the property, or someone you know, has looked at that property.

You do not want to buy a property that you haven’t looked at. Why? What if there was a hurricane, or if there was a fire? What if it was next to a chicken farm? There could be all kinds of problems.

So that was mistake number one. Mistake number two is very similar. You don’t want to make this one either.

Don’t get there, get all excited, someone else beats you and bids more, but you still want to make a deal; you want to be successful.

What do you do? You start bidding, and you don’t have an exit strategy. You do not want to buy any property, if you don’t have an exit strategy.

Now what does that mean? Exit strategy means you know what you’re going to sell a property for. If you haven’t seen it, that’s a problem.

If you don’t have an exit strategy, how do you know what to bid? You might bid right past your exit strategy.

So those are two big mistakes people make, and I know you won’t now because you’re going to avoid those.


How tax lien foreclosures work is simple and incredibly profitable if you know what you’re doing.

A lot of people confuse tax lien foreclosures and mortgage foreclosures. How tax lien foreclosures work compared to mortgage foreclosures is significant in terms of profit margin.

A mortgage can be as much as 95% to 97%, leaving you very little profit margin if you buy then want to resell the property.

Compare that to a tax lien where they’re only foreclosing on the back taxes, which are very low, mere pennies on the dollar, leaving you with a much larger profit margin.

The beauty of how the tax lien foreclosure process works is that you can buy so low that you can even sell it low for a much quicker turnaround, and then move on to the next property. It’s an amazing investment vehicle!

If you’d like to learn more about how the tax lien foreclosure process works, I have a gift for you. It’s called “Safe Haven,” a course that you can have for FREE.

It’s a PDF and 2 streaming videos that you can watch and learn about tax lien certificates and tax defaulted property. Safe Haven will get you started on the fast track to profitable investing, so be sure to get your FREE course today.

Want to learn how you can make big profits from bargain real estate? Would you like to buy homes for pennies on the dollar? Or earn double-digit interest rates? Learn how to secure your financial future with this FREE mini class today!

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Ted Thomas

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.

The Ted Thomas Difference:

  • Ted is recognized as America’s Tax Lien Certificate & Tax Deed Authority and has been helping people with investing in tax defaulted properties for over 30 years.
  • Ted has built a team of certified coaches that have 70 combined years of auction experience and are available to his students by phone to guide and mentor you to avoid getting overwhelmed or worse, losing money
  • Ted has ironclad PROOF that what he is teaching you does work. With hundreds of successful students providing testimonials and a 4.9 Google rating which is unheard of in this industry.
  • Ted and his staff don’t hide behind a website; they can be reached during office hours at 321-449-9940.

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