How to Buy a Home by Paying Back Taxes

Are you interested in buying a house with back taxes? Sometimes, people lag behind in paying the taxes on their homes for more than a year. The County to which back taxes are owed, puts the house for sale at a public auction. There is usually a redemption period (about 4 months to 2 years) during which time the owners can pay back the taxes, the interest and any other monies and reclaim their property.

The advantage of buying a house with back taxes is that the rate of return on such a purchase can be much higher than other investments. A majority of tax liens are redeemed, therefore, the risk of loss is minimal.

What to Keep in Mind

  1. Check the list of tax lien sales available in the County office and the amount of tax arrears for the properties you are interested in. Make sure the house is officially on the sale list.
  2. If the house is not mortgaged, then it belongs to you for taking care of the taxes through your bidding till it is not redeemed by the actual owners.
  3.  Keep your budget in mind. A number of people will be bidding for the same property and you must not get carried away and bid more than you can comfortably pay. You are usually required to pay the bid amount before leaving the sale.
  4. Do not make any modifications or enhancements to the property during the redemption period as there is every chance that the original owners might reclaim their property in the stipulated time.

The Process

  • The bidding amount is the tax due on the property. When more than one investor seeks the same lien, it will be awarded to the highest bidder.
  • Upon making the payment, you get a receipt Tax Certificate which gives you the right to own the home after the redemption period, if the owner does not buy it back during that time.
  • After the redemption period, there is foreclosure proceedings. Even during this time, the owner still can repay the lien and interest and foreclosure costs and reclaim his property. Foreclosure may give you sale on tax deed or the property title where you have the right to bid first for the property.

The downside of buying such a home is that when tax deed sales are held, numerous bidders vie for the property and you may not actually get to own it. Also the title must be made marketable which involves additional cost. One must therefore weigh the pros and cons before buying a house with back taxes.

When to Take Legal Help

Understanding this overall process is quite difficult, especially the process of bidding and foreclosure proceedings. A legal advisor or a lawyer who has a good working experience on taxation and legal issues can be the best help. Because of the complexities involved, if you hire one at the outset of the legal proceedings, it would be much better . 

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