When taxpayers fail to pay their property taxes or state or federal income taxes, the local, state or federal government can put a lien on their real property for back taxes and foreclose on it. The process is called a tax foreclosure. The method to sell the property varies from the local and state level to the federal level. The taxpayer is generally given notice of the tax lien. Some states allow taxpayers the right to redeem their property by paying off their back taxes, interest, fees and penalties. Tax foreclosure homes can be purchased for pennies on the dollar and offer buyers/investor high rates of return on their investments.
Tax Deed Sale
At a tax deed foreclosure sale, the property is sold at a public auction sale to the highest bidder for the amount of back taxes, interest and any court costs, so long as there are no mortgages or deeds of trust on the property. If there is a mortgage or deed of trust on the property, the lender will probably be the successful bidder. There are some other risks associated with a tax deed foreclosure sale that you should be aware of including:
- Some states allow the previous owner to redeem the property. You should check your state redemption laws.
- FHA has one year to redeem property insured by an FHA loan.
- The property may have liens, title defects or clouds on title. You should conduct a title search.
- A tax deed title does not contain any warranties, and properties are sold in an “as is” condition.
Be sure to check the value of similar homes that have sold in the area where the property is located to determine if you are getting a good deal.
How to Find Out About Tax Foreclosure Sales
Generally, municipalities will publish the tax deed information in the local newspaper in the county where the property is located. Another good place to check is the county tax assessor’s offer or sheriff’s office. Federal tax lien foreclosure home sales can found on the IRS’s website or in local newspapers.
Consult with an Attorney
It is recommended that you consult with a real estate attorney if you are interested in purchasing a property through a tax deed sale. The attorney can do a title search for you prior to the sale, and can assist you with questions regarding redemption or answer any other questions regarding the sale. The attorney can help you with any problems that may come up before or after the sale.
