Understanding Tax Foreclosures

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Some people say that the housing bubble has burst in the USA, now whether this is true or not I don't know. What is true however, is that the number of foreclosures has risen quite considerably in recent months. There are two main types of foreclosure, one is where a borrower has defaulted on a loan - usually a mortgage, the other is a tax foreclosure. A tax foreclosure could be a default on payment of property taxes, federal taxes or other taxes due on the mortgage contract.

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If you do not pay your taxes, the taxing institutions may put a legal tax lien on your property. The lien will include past due amounts, penalties and interest. A simple lien means that the outstanding amount must be paid out of the proceeds of the sale of the property, however this could take years and would be clearly unacceptable to those to whom the tax is owed. If the owner of the property fails to pay these amounts in a set time frame, the taxing authorities will move to put the property into tax foreclosure. Unfortunately, for the owner if this happens their property can be sold in a tax foreclosure auction. This could be a super deal to buyers because in these circumstances the property can be sold at only a fraction of its true value.

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There are many investors that are looking for tax foreclosure property because it is such a good deal. However, research and knowledge of the process is required because you could get a property that has other liens on it that you would have to take care of. There are brokers that are experienced in handling tax foreclosure property that can help you with your decision to buy this type of asset.

  What to Consider
Each state and municipality differs in the handling of tax foreclosure properties. Some may allow the purchase of the property before the auction, although most go through public auctions with either sealed bids or full auction status. Different states handle the auctions in different ways. Usually the state or municipality has yearly auctions or a set period for their tax foreclosure properties.

There may be some variation in what is being sold however. In a tax lien certificate sale or auction, the lien is purchased. The buyer will acquire just the value of the lien. A full tax foreclosure auction allows you to buy the property after which you will receive a deed and title for the tax foreclosure property.

While tax foreclosures can be an incredible bagain, a prospective investor must do their due diligence in investigating properties. Well informed buyers can get a great deal, but the uninformed can incur a huge loss.