Lien Certificates - What Exactly Are They?
Lien certificates may be the hottest new money maker for today's profit-driven
investor, but what are they - really - and are they safe?
Lien certificates are a way for the government (either on the local, state
or federal level), to collect back taxes on a person or property without actually
taking possession of their property and selling it themselves. Lien certificates
work as a sort of middle-man for the government, allowing them to recoup lost
tax revenue quickly and easily.
Lien certificates can be placed on a property owner by the county or state
taxing authority for nonpayment of real estate taxes, or the federal government
for non-payment of personal income taxes. It is not a repossession of property
- at least not yet, and can actually give the delinquent taxpayer much needed
time to raise the funds needed to pay back their tax debt without losing final
ownership of their property.
When a lien is filed on a person's property, they can no longer control what
they do with the property until the lien is redeemed (or paid off). This includes
transferring the tiles as a gift, or in a property sale or even using the property
as collateral for a mortgage.
Once a lien has been filed, the tax lien may be offered for sale at a county,
state or federal-sponsored auction which is open to the public. Rarely, tax
liens may be offered "over-the-counter," by the taxing authority,
but this is usually not done until it has been first offered in at least one
public auction. Prospective buyers will then either bid on the lowest amount
of interest they are willing to accept on the lien certificate, or be offered
the chance to purchase individual certificates randomly by drawing lots.
Once a tax lien certificate is purchased, the investor pays the entire tax
bill for the homeowner, giving them a set amount of time to repay the debt,
with the interest specified within their actual bid. This type of "public
loaning process" can give a cash-strapped homeowner needed time to come
up with the money necessary to save his property from foreclosure. If paid on
time, the lien is released and the property owner retains ownership. If however,
the tax lien certificate is not paid in full by the due date, the property's
deed is then transferred to the investor, giving him full ownership rights to
the property listed on the lien.
Since the government controls the entire process, tax lien certificates are
an extremely safe and profitable for anyone willing to take the time to investigate
the liened properties in their area, and the cash available to purchase the
lien certificates. For more information on tax lien certificate sales in your
area, contact the county or state tax office.
Tax Lien Certificate
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