What is a Tax Lien Certificate?
A tax lien certificate is nothing more than a lien on a property for not paying taxes. Essentially, each and every year owners of real estate have a tax lien (aka financial obligation to pay taxes) placed on their real estate. If the property taxes are paid on time the tax lien is removed. If they are not paid, in due time the county government will allow investors to pay on behalf of the real estate owner. The winning bidder at the public tax lien auction receives a tax lien certificate as proof of purchase. As the owner of the tax lien certificate the investor may expect one of two possible outcomes, 1) An annualized return of 16%, 18%, up to 50% per year on what they paid to obtain the tax lien certificate or 2) Through foreclosure, become the owner of the real estate free and clear of any junior liens (aka mortgages and mechanics liens). Once you become the owner of the tax lien certificate all you must do is sit back and wait. When the property owner finally decides to pay his tax
A Tax Lien Certificate If you own a property you have to pay Property Taxes (Council Tax is the UK equivalent) to the county that the property resides in. If a property owner goes through a bad financial spell and does not pay the property taxes, the taxes do not go away. They continue to be due and will mount up until someone pays them. The county relies on property taxes for revenue to pay for schools, county improvements and other public services. If a property owner does not pay his/her taxes then the county has the right to place a tax lien (legal charge) against the property and sell the lien to an investor as a way to recover the taxes due.
