All You Need To Know About a Tax Sale

For over 200 years, the US government has used the value of real estate to stand in when citizens don’t pay their taxes. Local taxes are important to pay so that your community municipalities can be funded. This includes hospitals, police and fire stations, public schools, municipal road maintenance and garbage service, and other public places, like parks. Federal taxes take care of federal programs, those that go beyond the state level. When these taxes go unpaid by an individual who owns property, the government can levy taxes against that property.

There is a program that allows the government or counties, states, and even the federal government to generate the lost income if someone doesn’t pay their state or federal taxes in cases where a lot of money is owed. At a tax sale auction, you have the ability to pay for a tax certificate giving you the right to collect on past due taxes. You are essentially loaning money to the property owner to fulfill their tax debt. In the case of a Deed sale, your act of fulfilling their taxes makes you the owner of the property.

A Tax Certificate Sale is a public auction tax sale where the right to collect on a delinquent taxpayer's debt is sold to the highest bidder. These sales is held at the county level and there is generally one a year. When you buy a certificate, your money goes to the government in fulfillment of the debtors tax amount. In exchange you are given first lien on the title of the property, ahead of mortgages and subordinate only to state tax liens.

Terms of these agreements can vary from place to place depending on the area, but the general rule is that when a tax certificate, if the debt is not paid by the owner, you obtain all rights to the property as it’s new owner.

A tax sale for a deed is another auction based format where you are bidding for the deed to a delinquent taxpayer’s property. Legally all parties have been notified prior to the auction to give them a chance to pay their back taxes and remain owner of the house. The difference between this and a tax certificate is that you are buying the property outright instead of taking the risk on whether the owner will pay their taxes or not.

They are extremely different kinds of property auction items and there are usually separate auctions for each. Make sure you know what you’re getting into. Not only are there different rules and guidelines for each but, again, things differ from place to place, even within the same state might differ. It may be helpful to seek legal counsel if this is something you might be interested in investing in.