Two Sides to Delinquent Tax Sale

There are many ways that an individual or family can lose ownership of their property. And there are many ways that an individual or company can gain financial freedom by virtue of investing. Real estate is the number one way for both to get involved in the risk associated with debt and the benefit of capital gain. One of the ways that these two individuals are connected is through a delinquent tax sale.

There are two sides to a delinquent tax sale. First, there is the side of the property owner who has fallen behind on his or her obligation to pay their assigned property taxes. After the default payment has not been made the property immediately has a tax lien against it that continues to compound over time. The two ways that a property owner can go into debt against their property is with a tax lien or loss of deed. A tax lien certificate represents the owed tax debt against a property. A tax deed, however, represents debt on the actual land and property. On the other side of this debt is the tax lien investor who can find financial benefit from this situation by purchasing the tax lien certificate or tax deed at a cost that is a fraction of the debt.

On one hand, the delinquent property owner may or may not be able to regain ownership of their lien certificate or tax deed within their allotted three years. They can try to avoid the loss in the first place by staying on top of their debts and making timely payment. If the debt has already been transferred or the land ownership has already been transferred the original property owner has to be willing to work twice as hard to regain it for its full debt price and the interest that has accumulated.

On the other hand, the role of the delinquent tax sale is to offer the debts a transfer of collection responsibility. Many individuals and companies with expendable income see this type of opportunity as a way to get into lucrative real estate investing. They purchase the tax lien certificate for as little as 2% of its original amount from the county and can collect on it. They've paid the home owners taxes and now they owe the debt and interest back to the investor. They can also purchase the tax deed which brings them ownership of the deed and the land. From there they can sell it to whomever they please and make a profit. Although it is not that well known, it is a way that many people become investors and grow their financial portfolio.