How Does a Tax Lien Certificate Work?
A tax lien is issued on a piece of property when the property owner is late or has failed to pay appropriate taxes. In some states, this tax lien can eventually be converted into a tax lien certificate and auctioned to public buyers. A buyer purchasing a tax lien certificate from the government is buying either the right to collect a fixed, government-mandated percentage or the right to the title of the property itself. This is possible if the owner defaults on paying the lien after a given amount of time. In short, what is bought are delinquent taxes, an interest rate — and at foreclosure — the property itself. Buying tax lien certificates is an attractive option for people looking to acquire real estate cheaply. As with any investment, there are risks to consider. If you are considering buying a tax lien certificate, do as much research on the property’s title as possible as well as the owner’s bankruptcy status. In a bankruptcy, the original owner’s creditors and the Internal Reve
