A tax sale is a sort of auction that a government agency conducts to collect taxes which are owed by land owners in a county. This auction is an offering to investors regarding pieces of land which have unpaid taxes, accrued interests or any other costs that is connected with the property. These days, internet based sales are very popular due to the expanding market of investors who live outside of the county but are interested in investing in these real estate. The actual land is not really sold but the rights to pay the taxes are sort of given to someone else. The current owner is given an extension to settle delinquent taxes in order to regain the certification given to the person, establishment or group that opted to pay the unpaid taxes on his or her behalf.

Tax Lien Certificate

The winner of the tax sale will be awarded a certificate that specifies the real estate property that he, she or it has paid for in behalf of the current property owner. Specifics are dependent on the factors that surround that particular piece of land and the amount that the current owner owes the government agency. The owner of the tax lien certificate will earn back his or her investment through two ways. The first way is when the land owner will pay the government what he owes it in taxes and costs. When all is settled, the government will let the tax lien certificate owner know that the certification can now be redeemed with interest. The other way to earn from a tax sale is when the property goes through foreclosure. When this happens, the possibility that the land will go to the holder of the tax lien certificate is very high.

Advantages and Disadvantages

The return of investment can be extremely high in a tax sale. Many state laws are very generous when it comes to this and certificate holders, even for a day, might stand to make a clean profit from it because the interest rates are high. Risk of losing the investment is minimal because many property owners usually prefer to keep their property instead of letting it go to foreclosure, which means that the investor will most certainly get paid.

One disadvantage to this is that big companies are often the winners of tax liens because they have had their eye on the property for some time already. Big companies also have the capacity, financially to pay the necessary costs to be able to immediately acquire the lien. Obtaining the actual property can be disadvantageous because there may be something wrong with it or the new owner may be responsible for its care.