The Basic Facts of a Tax Sale

A tax sale is an auction that is put on by a local, state, or the federal government when a property owner has become delinquent on the taxes that they owe. When this happens, there are a number of things that can happen to both the property owner and to the person who invests in such a tax auction. This can either be a good situation for the investor, as it guarantees a positive return on their investment, or a negative one for the property owner, as their assets can be seized by the investor after a certain period of time. While the property owner may wish to remain in possession of their real estate, this is not often possible, as there is a reason why they couldn't pay their taxes in the first place. This means that they are usually in serious financial trouble and thus will most likely have their real estate seized under the laws guiding the lien.

A very simple analogy for this situation is when you go into any other kind of simple debt. Often times, the company or agency to whom you are indebted will initially work with you to decrease your debt through paying it back, but if this does not work, then the debt is written off to a debt collection agency who, in turn, seek to have the debt repaid by you directly to them, as they now own the debt. In this case, you will need to work with the debt collector in order to eliminate your debt. This applies to a tax sale, as the government is like the company or agency to whom you are indebted. The government then "writes off" the debt by selling it through a tax sale to the highest bidder, who is like the debt collection agency. The person who invests in the tax sale then seeks to have the debt repaid by you, the property owner.

When this happens, there are two options for the property owner, but action must be taken quickly or else the investor will seize the property because you have defaulted on your taxes or other payments. The property owner could allow this to happen and simply write off their loss, as they will no longer owe the debt once the property is seized. However, should they wish to maintain ownership of their property, they can work with the investor in order to pay off the debt. When they do that, they must pay interest on the debt as well.

Either way, it presents an opportunity for a solid return for investors in a tax sale, as they will either end up with a property that they can resell for a profit, or they will be repaid the debt plus interest that is owed by the current property owner. Of course, for any property owner, this is a very difficult situation that affects financial credibility, and could result in a huge loss of property, like a home.