A Crash Course in Tax Lien & Deed Investing (and My Love/Hate Relationship With Both)

REtipster provides real estate guidance — not legal advice.

The information below can be impacted by regional legislation and other unique variables. For the real deal, always consult with a qualified legal professional before taking action.


If you're experienced in the real estate trade, you've probably heard the occasional reference to Tax Lien and Tax Deed Investing.

It's a niche that has the potential to be insanely profitable and it has provided a lot of big breaks for investors around the country. It's a solid, time-tested approach that has made a lot of money for a lot of people, but I still have my issues with it (and we'll get to that in just a minute :).

I've found that most investors don't have a very thorough understanding of how this investing strategy works (it even took me a few years to figure it out), so I wanted to give you a basic overview of what's going on in this realm,  how the mechanics work, and most importantly – I want you to see the merits behind this approach and why it's a major opportunity to cash in on a TON of free real estate equity. With any luck, I think you'll start to see what all the excitement is about.

The Basics: Tax Delinquency & Foreclosure

As any property owner can tell you – every piece of real estate in the United States is subject to property taxes. If you own real estate, you'll be expected to pay these property taxes each year. If you fail to pay these taxes, your property will become “tax delinquent”, which means it has started down a path that will eventually lead to tax foreclosure (i.e. – your property will be seized and repossessed by the county or municipality) IF you fail to pay these taxes current within the required time frame.

How long can a property go “tax delinquent” before it is seized by the county? It all depends on the state.

In every state in the U.S. – there is a set date during the year when, if the taxes have been delinquent for a set period of time, they will be seized by the county. In some states, the county will wait for 2 years, others will wait for 5 years, but none of them will wait forever. Regardless of whether a property is owned “free and clear” of any mortgages…    if a property owner decides to quit paying their property taxes, they will inevitably plan to lose their property to tax foreclosure.

Tax Sales: How Each State Works

Every state has a unique set of rules and regulations when it comes to the time frame required to pay taxes current, how the foreclosure process is handled and how each county will try to regain its lost tax revenue. Depending on which state you're working in, there are some basic rules you need to understand about how the process works.

AL AK AZ AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY DC

Disclaimer: The map shown above is a representation of the information I was able to find and interpret through many hours of research. While I believe the information is fairly reliable (I did include links within each state, so you can see my sources), I cannot guarantee its complete accuracy. Many states change their laws and statutes from year to year, so before you dive into the pursuit of tax deeds or tax liens in any particular state, be sure to verify the information above before you get too far along in the process.

Almost every state has some kind of variation in how they handle the various aspects of their process. No two states are exactly the same in all respects, regardless of which kind of tax sales they have – so whichever state you decide to work in, be sure to take your time and do your homework.

Generally speaking, a county's primary concern is to generate enough revenue from each property to make up for their lost tax revenue (whatever that number happens to be). Surprisingly, the actual “market value” of each property is mostly irrelevant. Even if a property could feasibly sell for $500,000 – the county's intent is to generate enough funds to restore the amount of unpaid taxes they were owed from the delinquent property owner – so for example, if a property worth $500,000 only had $10,000 of delinquent taxes at the time of foreclosure, this $10,000 number is usually the county's only real concern (and sometimes they will even start the opening bid amount at this price).

The supposed $500,000 “market value” holds little relevance to the county – and this is where the real opportunity comes from at a tax sale.

A lot of properties can be bought for ridiculously low prices at a tax sale. Why? Because you're not dealing with a normal property owner who cares about getting full market value, you're dealing with the local government. Contrary to popular belief, it's not the government's goal to get rich off every property they sell. They just want to get these properties off their books and in return, they want the money they were owed in the first place (with the hope that these properties will end up in the hands of someone who will keep the property taxes paid current).

How Tax Liens Work

In the Tax Lien States, when a property becomes delinquent for non-payment of property taxes, the county will sell a “tax lien certificate” to an investor as a way of recouping these unpaid property taxes.

When someone purchases one of these tax lien certificates, they are not buying an ownership interest in the property. Instead, they are buying a lien on the property. As the owner of a tax lien certificate (aka – tax lien), the delinquent property owner still owns the property. However, the lienholder is entitled to repayment for the amount of the tax lien certificate plus interest. If the property owner fails to pay off this lien within the “redemption period” specified by their state, the lien holder has the right (but not the obligation) to foreclose on the property and take ownership. In most cases, if the lien holder does not move forward with foreclosure within the period of time specified by their state, the lien will be forfeited and the lien holder will lose their investment.

Every state has a different set of rules regarding the redemption period, the amount of interest that can be charged, the foreclosure proceedings, and several other aspects of the process. Generally speaking, once you understand how it works in one state, you'll be able to learn how other states work relatively quickly (because there are simple variations to the same basic process).

How Tax Deeds Work

In the Tax Deed States, the process is quite a bit simpler than that of tax liens because when you buy a tax deed, you are buying the actual property. The process is simpler because in most Tax Deed States, there is no redemption period. Similar to tax liens, the county's primary interest is to recoup the unpaid property taxes on each property. Once a tax deed has been sold to an investor, the prior owner cannot come back and reclaim their property. When you purchase a tax deed – you own the property free and clear.

Similar to tax lien states, every tax deed state has a different set of rules about how long a property must be delinquent before foreclosure occurs, but given that there is no redemption period, most of the complexities are eliminated, which makes it a much simpler system for investors to work with.

How Redeemable Deeds Work

If you can envision Tax Liens on one end of the spectrum and Tax Deeds on the other, Redeemable Deeds live somewhere between the two because they share some similarities with both sets of rules (and many of these similarities depend on which state they are being sold in).

When you purchase a redeemable deed, you are literally purchasing a deed to the property (just like a Tax Deed). However, a redeemable deed is also subject to a redemption period (just like a Tax Lien), which adds a bit of complexity to the process. For a set period of time after a redeemable deed is sold, the prior owner has the right to “redeem the deed” and purchase the property back from the investor. In order to purchase the property back, the prior owner has to pay the full amount that was paid for the property at the tax sale along with some costly fees and penalties (regardless of how much time has accrued during the redemption period).

If the prior owner does not redeem their deed within the specified redemption period, they will lose all their redemption rights and the investor can rest easy knowing that they are the official owner of record.

How Mixed States Work

There are a few states with some counties that sell Tax Liens and others that sell Tax Deeds. There are various reasons for this kind of set up (which I won't get into here) – but the key is to simply do your homework when you're working in these states (detailed above) and make sure you understand what you're dealing with at each tax sale, so you can avoid any confusion about what you're bidding on at an auction.

Tax Liens vs. Tax Deeds

If you're trying to decide whether to invest in tax liens or tax deeds – I think it really comes down to what your goals are as an investor.

If you're looking for an investment with a very strong return (far higher than anything you'd ever get from a conventional investment), tax liens are a great way to do it. For example, New Jersey offers a maximum rate of 18%, Arizona offers a maximum rate of 16% and Iowa offers a guaranteed 2% per month (i.e. – 24% return annually). Not to shabby…   assuming the property owner actually decides to pay you off before you become the owner of the property.

If you want to eliminate any ambiguity about whether or not you're going to own a property (i.e. – if you actually want to own the property and/or flip it for a profit), tax deeds can be a great way to do this. Personally – my goal is to buy and sell real estate (rather than simply earning a return on the money I've invested, with no certainty about what will happen in the end). Given this, you won't find me purchasing tax liens anytime soon…  but again, that's just me. Not everyone has the same objective that I do.

My Problem With Tax Liens & Tax Deeds

Now that I've given you (hopefully) a clear, unbiased explanation on how tax liens and tax deeds work – along with some legitimate reasons why you might want to consider investing in them yourself…  I'd also like to explain why personally, my history with them hasn't been so greatAlso, keep in mind, I don't consider myself to be an expert on tax sales, so take these next few paragraphs with a grain or two of salt.

I've been to a few auctions in my time and I've taken the time to learn how this whole process works, but it's not because I like to buy tax liens and tax deeds myself. I find it relevant only because the process of tax foreclosure works hand-in-hand with my primary investing strategy. My goal is to buy tax-delinquent properties BEFORE they are seized by the county (i.e. – before I'm one of a hundred other competing bidders, struggling to find a worthwhile deal at an auction).

RELATED: Everything You Need to Know About Getting Your County's Delinquent Tax List

There are a few primary reasons why I've never been a huge fan of tax lien and tax deed investing:

Tax Foreclosures create a serious blemish on a property's title

When a property is foreclosed due to delinquent taxes – it creates a significant blemish on the property's title – one that most title insurance companies will never insure over. As a result, it can be extremely difficult to sell a property that you purchased out of tax foreclosure because if your buyer can't get title insurance, they can't get a mortgage, which means they can't buy your property!

It is possible to solve this problem in a couple of different ways:

1. You can pursue a quiet title action, which is a 3 – 9 month legal lawsuit which can clear this title issue through the courts. Typically the cost will be about $2,500+ (all in).

2. You can use a tax deed title clearing service. Assuming the county followed the correct procedures (and the vast majority of them do), this option typically takes less than two months to complete and will cost somewhere in the range of $1,950 – $2,150.

Keep in mind that with either of these solutions, you won't be able to administrate the “fix” until AFTER you've purchased the property (which requires a leap of faith), and you'll still have to deal with any government liens on your own – grass mowing fees, demolition judgments or EPA environmental liens (just to name a few). Regardless of which option you pursue, it's a good idea to get a title report on your property to see the full picture of what's going on.

At most tax sales – payment is required almost immediately after purchase

…and if you fail to pay the full amount at the time of purchase, your purchase will be canceled (and it may result in you losing your deposit and/or being disqualified from future sales).

I understand why a county requires all cash upfront – I really do…  but when I was getting started, I didn't have a giant pile of cash to start with. If you're gunning for a property that gets bid above the price you're able to pay (which in my case, was always a REALLY low price), you're out of luck. Given that auctions have a way of sending property prices WAY out of “good deal” range, the few times I've attempted this method has proven futile for me.

I've had an exceedingly difficult time finding great deals on properties I actually wanted to buy

For the same reason I've always had trouble finding great deals on the MLS, I've always had trouble finding great deals on properties at an auction too.

When you think about it – the whole premise of an auction is to create an environment in which bidders have to compete with each other to buy things. Auctions are designed to work toward the benefit of the seller (i.e. – the county) and in most cases, it does.

Don't get me wrong – this doesn't necessarily mean that deals can't be found at a tax sale (because I know of several investors who find them routinely), but the fact is – an investor's ability to succeed in this kind of buying environment is highly contingent on who else is in the room and what they're willing to pay for the same properties.

In the auctions I've attended (and I've only been to a few, by the way), I found the process to be rather annoying and even a bit disappointing. The properties I had my eye on, also had another 100+ other contenders who were more than happy to bid the price FAR above the point that it would have been a profitable investment for me (or anyone else, for that matter). I don't deal well with this kind of competition (and I'm not sure how anyone else could either), especially when I know there are other ways to find deals.

For these reasons, I can't say that tax liens and tax deeds are my preferred method of buying real estate. However, I do know of several other investors who pursue this strategy and they find great deals on a regular basis.

Every investor has to choose which strategies they're going to pursue and which strategies they're going to ignore, and this is one I've chosen to ignore (for the most part). Keep in mind, this doesn't mean that YOU can't find great success here. I'm certainly not the greatest investor alive – and I honestly don't want to discourage you from pursuing this strategy if you think it's worth exploring (believe me – I had plenty of people tell me that land investing was a waste of time and they ALL turned out to be wrong).

Special Thanks

As I was doing the research for the map shown above – there was one particular resource that was extremely helpful to me, so I wanted to give credit where credit is due:

  • Joanne Musa (aka – the Tax Lien Lady) has an incredibly helpful and detailed course that goes into great detail on this subject. There were several states that had very limited information on how their processes are handled and her information was a MAJOR help as I was trying to put the pieces together and show a comprehensive layout of the entire United States in one easy-to-find place. If you need more information on the subject, her material is definitely worth checking out.

Free Webinar With Seth and Jaren

You are invited to an exclusive webinar with Seth Williams and Jaren Barnes on Wednesday, October 24 at 8:00pm EDT (5:00 PDT).

Jaren will be hosting a live presentation addressing some of the most critical elements involved with finding deals and motivated sellers in the land business.

In this live webinar, you’ll get the scoop on how to choose the right market, how motivated sellers think, where to find them and what to say ( including some of the best tips, tricks, stories and lessons you’ll need to know as you start pursuing cheap land deals on your own). You won’t want to miss it!

Space is limited, so register now to hold your spot!

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About the author

Seth Williams is a land investor and residential income property owner, with hundreds of closed transactions and nearly a decade of experience in the commercial real estate banking industry. He is also the Founder of REtipster.com - a real estate investing blog that offers real world guidance for part-time real estate investors.

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  • C. Smith says:

    You said “My goal is to buy tax-delinquent properties BEFORE they are seized by the county”. How do you do this? I’ve heard tale that you can, in some cases, just pay the taxes and then said property skips the auction? (Vastly unsure how that works, honestly). Very informative article, thank you!

  • pick says:

    Great work . i’m bookmarking one related site here for better user experience

  • Corrine says:

    Hi Seth Williams,
    The extra charges of a government on the purchasing of property in the form of general country tax can be eliminate easily with in a seven days according to the rules and regulations of a government,If you write an application with the authentic reasons for a elimination of property tax and also attached a legal documents of a property tax pairs after that submitted in the government office by the tax layers which is helpful for you to approved the claim of your property tax in the seven days without any allegations of a government on the application of your property tax ,Remember don’t write any irreverent reasons in the applications of property tax you want to submit in the office of government and also don’t attached any illegal or extra document of property which increase the chances to refuse or neglect your claim application ,So keep it in your mind all the instructions and requirements given to you by the tax layer after concerning this kind of matter according to the current policy of government .
    Thanks

  • Ron Henry says:

    You mention you do better or prefer buying real estate other than through tax deed sale situations. What do you have better success with?

  • Melanie Haskins says:

    I bought a property in NY and find out through second party there is an outstanding mortgage remaining on it will I be liable for this

    • Hi Melanie – you won’t be liable for someone else’s mortgage debt (because they signed the note, not you), but if there is an active lien on the property, that will most likely create problems for you when you try to sell it.

  • Kevin says:

    Hi Seth,
    I have a question about insuring the property of a tax Lien sale. I am in my 12 month waiting period and was wondering what happens to my investment of the tax lien that i purchased if something was to happen like the house burning down? Would I ever get my money that I invested back in any way? Can I purchase insurance on just a tax lien deed? If so what is it called because when I called a few insurance companies they acted like they couldn’t issue anything to me.

    Thanks,
    Kevin

    • Hi Kevin – I think it’s safe to assume you can’t insure something you don’t yet own (and owning the lien is not the same as owning the property itself). Frankly, it doesn’t sound like a huge risk even if it does burn down, because all you have into it is the cost of the lien. It sounds like a risk you’d just have to tolerate in the meantime, unfortunately.

  • Jeff says:

    Seth,
    Thank you for your quick and clear reply. I had no idea the county was able to wipe out prior liens/mortgages when taking custody of that property for a tax foreclosure. It makes sense that proper & timely notification is given to all lien holders. It also makes sense why title insurance may be difficult to get. I did not understand the full implications of why lenders prefer, and in some cases insist, that they pay the taxes from an escrow account. Your answer explains a lot. Once again, thank you very much!

    Jeff

  • Jeff says:

    Seth,
    Great Article! Clear and Concise! Well written! Very appreciated! Thanks for remaining objective as you shared information about an investment path you don’t prefer.
    Even though this question was addressed in an earlier post /reply, I need clarification on one point. I must be missing something because this just doesn’t make sense to me.
    This is in reference only to properties with a mortgage where the county/state is holding a Tax Deed sale due to delinquent taxes. My understanding is, the lender, who holds a promissory note, has legal control of who has title (and therefore the deed document) and would expect full payment (excluding agreement to a short sale) of the loan balance before they would agree to transfer of title to the new buyer. How can there be a Tax Deed sale in which the purchaser simply takes legal control of the Deed, as well as, title to the property with no further payments to the lender? The property is identified as collateral in the promissory note. Right? So, the bank effectively owns the property (has the right to take title of it if the loan isn’t paid). Right? How can the county/state just sell it?! If the loan obligation doesn’t also transfer with the title, does it remain with the original owner? If so, why would the house ever be named as collateral if the bank can’t claim it?

    HELP! Am I wrong?! What am I missing?!

    Thanks, in advance!
    Jeff

    • Hi Jeff – when a property is seized by the county in tax foreclosure, it automatically wipes out ANY/ALL prior owners and lien holders. It doesn’t matter who they are are what claims they had to the property – the tax foreclosure wipes them out, and the buyer of the tax deed (in theory) has clear title from the county.

      The funny thing is, the proper way to wipe out all of these prior lien holders is for the county to give them all proper notification (which the county will try to do, but it’s very difficult to prove that these prior owners/lienholders actually received such notification). As such, it’s a sticky area where these previous owners could technically come back and claim to own part of the property if they were never properly notified (which again, typically can’t be proven one way or another). As such, most title companies won’t provide title insurance on these types of properties with a tax sale in their past (because it’s so difficult to prove that all prior owners were notified), even though the tax foreclosure event is supposed to wipe out all prior owners by default.

      All this to say, if a lender doesn’t ensure the taxes are paid current – yes, they will lose whatever claim they have to the property. This is why many lenders will require escrow accounts to make sure these taxes are paid current, and they will track the status of these taxes on an ongoing basis to make sure they’ve been paid.

  • Bob says:

    From all that I’ve read tax lien certificates are an investment. There is an HOA in Florida where the president of this HOA took it upon himself to purchase the tax lien certificates on a property that he plans on putting a lien on and foreclosing on due to overdue HOA fees. I believe this was done so that the tax liens didn’t override those plans. So by owning the tax liens this HOA president thinks he can continue on with his plans.

    My concern is an HOA is non-profit organization. This was also done without the homeowners in the community even knowing it was done.

    Just wanted to get your take on this

  • The extra charges of a government on the purchasing of property in the form of general country tax can be eliminate easily with in a seven days according to the rules and regulations of a government,If you write an application with the authentic reasons for a elimination of property tax and also attached a legal documents of a property tax pairs after that submitted in the government office by the tax layers which is helpful for you to approved the claim of your property tax in the seven days without any allegations of a government on the application of your property tax ,Remember don’t write any irreverent reasons in the applications of property tax you want to submit in the office of government and also don’t attached any illegal or extra document of property which increase the chances to refuse or neglect your claim application ,So keep it in your mind all the instructions and requirements given to you by the tax layer after concerning this kind of matter according to the current policy of government .
    Thanks

  • Barbara White says:

    WOW! This information was very helpful and in the direction I want to go!

  • Joe says:

    Oblivious. Had a trust deed on. My commercial property. property tax not paid since 2011. After bank. Stopped foreclosure.still in my name. . if a generation skipping tax was set up by my grandparemts. With this property on the skip form . how do i proceed?

  • mary says:

    How about a question. Court ruled bank could not prove they held the Note of my property. Servicer has been paying the taxes and insurance ( lawyer told me not to pay ( maybe due to complexity). Will they put a lien on my property when 5 years statute of limations ( and they haven’t sue again) is up? Can I open a escrow account and put the back taxes in and offer payment to them if they do put a lien on it?? Same with insurance?

    • JOe says:

      I’m a noob, got a little bit of money( 30kish). I’m looking to buy foreclosures at 8k most, want 3 properties at that price, then go to bank and get loan on those 3 for 60k(each was sold for more than 20k before), then use that money to buy more profitable properties to flip/rehab/etc…since u can get 8k home that sold for 6 figures 5,7,10 years ago, that u may not be able to sell, but how is it to get loan;? if you have 3 properties that were bought for under 30k total, but appraised/sold before for 3/4x’s as much(120k). Is that something that can happen( get a bank loan?)
      No matter what i’m putting this money in real estate, before i dip into it, and have nothing. Surely will f$&^k up, but that okay that how you learn, but don’t want my lesson to cost an arm and a leg, and kill the whole “plan”……… Anyone willing to be short-term Mentor, anybody?

  • grace says:

    FEDERAL TAX LIENS CANNOT BE REMOVED FROM YOUR PROPERTY, he must pay your federal taxes in order to get a deed in his name, I don’t believe he can legally evict you, and if he attempts to, you should get a legal aid attorney, and ask for a jury trial, but I really believe that this is a godsend, and the buyer just lost $3000.00 in a bad investment. He neglected to do a federal tax lien search on the property. He will not get your home without paying that lien for federal taxes first. Hope this helps.

  • Bill Adkins says:

    Yes my name is Bill I just lost my house in a tax sale Im a single dad I have an 11yr old daughter I am 53 I worked real hard to get this house I live in panama city Fla. I got behind due to illness I have corartive artery disease and recently heart failure one time only pumping 14% got stronger than dropped back down below 30% I can’t walk far with out running out of breath and on an external defibrillator and oxygen . now the guy who bought it for 3000. Dollars served me with eviction papers I am unable able to work I rented a room out that covers the electric, my phone household cleaner and just a little left over I have no idea what to do this was my entire retirement or what rights I have I’m about to lose everything in it also I have no car what can I due to protect my family and a roof cuz if I get kicked out on the street I also lose my daughter . And one other issue in question I have an IRS tax lean on this house who is responsible or does it get whipped clean .oh and this guy said he will work with me if I can come up with 1000. A month and he’ll sell it back to me for about 20,000. Or so . I’m sorry if I could afford 1000. A month I sure in the hell would not be in this problem please need help in site knowledge something my little girl is the reason I’m alive right now I fight for my life for her. Thank you sorry it was long

    • Seth Williams says:

      Hi Bill. Wow, I’m so sorry to hear about the situation you’re in. It sounds like there is a lot happening here.

      I’m curious – are you currently working? If not, do you have the ability to work (preferably something that doesn’t require much physical labor)? It sounds like the biggest problem is creating some kind of sustainable income to work with… without that, it will be hard to address the other issues.

      Have you investigated the availability of any kind of governmental assistance to find affordable housing? If $1,000/mo is too much (which I agree, isn’t cheap), I’m sure there are probably less expensive options somewhere.

      • Bill says:

        No I’m not able to work I have filed for my disability waiting on a phone interview on the 12th my only income is 300. A month from my roommate that i got . right now Its even hard to breath and just walked from the kitchen to my room and it’s only a 3 bedroom trailer I was up for 2 surgery soon as my heart can handle it and one is a pacemaker . and what about the IRS lean ? Who gets it ?

        • Seth Williams says:

          I’ve never had to deal with an IRS lien – but I believe those typically show up when you’re back due on your federal taxes. If the lien was filed against you, I would think this is probably the first financial issue you’ll want to get sorted out.

          • Bill says:

            The. IRS LIEN.WAS PUT ON MY HOUSE AND OR PROPERTY THE IRS TOLD ME I WOULD NOT BE ABLE TO SELL MY HOUSE UNTIL IT WAS PAID BUT IF I WAS TO TRY AND SELL IT IT WOULD HAVE TO BE FOR MORE THAN THE LIEN SO THE IRS GETS PAID FIRST .I THANK YOU FOR YOUR HELP

  • Keith says:

    If you purchase a Tax Deed and the bank still owns that property, how is that resolved? Does the bank just loose its money?

    Thanks,
    Keith

    • Seth Williams says:

      Hi Keith – if you’ve purchased a tax deed, then the bank doesn’t own it anymore (yes, they lose their money). A few states have redeemable deeds, which may change the rules/process a bit, but for the most part, if you’re working in a tax deed state, the old owner will have lost their interest by the time it goes through a tax deed sale.

  • Robert says:

    Have you sold tax deed land without quieting title?

    • Seth Williams says:

      I have sold properties with a tax sale in the title history. Remember, the existence of a tax sale in a property’s history doesn’t necessarily mean there’s a problem, it just harder to prove definitively that there isn’t – which is why most title companies won’t insure it (because they want 100% certainty before they’ll put their necks on the line).

      With cheaper properties, there are a lot of buyers who will gladly buy them without title insurance – which is a slight risk on their part, but given the lower cost of the property and the unnecessary hassles of title insurance (especially when people know how to research the title history themselves), many people are willing to take that risk… so it’s not as big of an obstacle as you might think.

  • James says:

    Few *investing* articles I find by chance on the internet hold my attention for long. I tip my hat to you Seth, I stayed until there were no words left to read. I bookmarked this page so I could follow up on the links, I’m sure something will interest my eyes.

    Many have said/inferred the same as I think … predatory, kicking a person when they are already down, something a circling vulture enjoys … waiting for death, then swooping in on a fresh kill. I have no stomach for this sort of investing. Sponsored by those loving bean counters, enjoyed by the heartless.
    … But someone’s got to do it yes? Maybe one of you all, not me.
    … Still, a good essay on the subject.
    … Your exception to the predatory rule didn’t go unnoticed.
    I was looking at property tax breaks on my *.gov* site for 65 and older, long time resident etc, and delinquent tax sales were mention. So off I went looking for a ‘how to’ site and what the competition for the same was. You won hands down on info.
    Thanks for your hard work, sorry … this type investment doesn’t suit me.

    I have around 20K sitting in a useless bank account begging to earn something. Big bank is a big nil today, to old and wheel chair bound to buy fix & flip, to scared to trust wall street and I’m done loaning money to relatives with the promise of a 10% return. I haven’t given up the hunt, around the corner I’ll find it hiding.
    james from Fl.

    • Seth Williams says:

      Seriously?? That’s great to hear James! Thanks so much for those encouraging words!

      I hear you – this type of investing honestly isn’t my favorite either. I know many do well at it, but it’s not quite in alignment with my strengths and the things I enjoy.

      You know… if you’re looking for an easy place to put that $20K (a place that won’t earn a ridiculous return, but still much better than most bank accounts and mutual funds), you might want to check out a site like Fundrise. I invested some money with them earlier this year and sure enough, it’s earning a slow but steady return so far (and it’s SUPER easy to use). I put together a review on it too, you can check it out here if you’re interested.

      Best of luck to you!

      • Ricardo says:

        As of today, my experience is a negative one. I purchased a vacant lot in California in 2004. I have never been able to get any interest from anyone in buying it. I finally got someone to buy it, only to find out that the liens on the property from the previous owner is NOT cleared through the sales. I purchased the lot for 23K in 2004, listed it up for sale for 50K, accepted a 40K offer around May of 2017, only to find out that there are over 70K in liens from other agencies in SB (development dept, etc) that need to be paid. Now buyer is threatening lawsuit over failure to perform.
        First and last time I play this game.

        • Seth Williams says:

          Oh wow, I’m so sorry to hear about that Ricardo. I guess that underscores the importance of doing a title search (or if you don’t understand how to do a title search, hiring a title company to do it for you).

          In your defense, I’m surprised a tax foreclosure didn’t wipe out all the prior liens – I was always under the impression that this would clear the title… but perhaps it works differently in different jurisdictions around the country. Either way, I appreciate you sharing your experience here.

  • Deb says:

    after you win a bid on a tax deed, what are the steps? do you still have to pay a whole bunch of fees by the state< do you have to pay what they owe on mortgage?

    • Seth Williams says:

      Hi Deb – great question. I would think these standard procedures probably vary at least a little bit from state to state (and even from county to county). To get the right answer for your situation, you’ll probably want to call your county treasurer/tax collector and get their insights on what to expect.

  • Vlad Bekker says:

    Seth,

    Thanks for a great post. I’ve been doing a lot of research for the state of Texas, a redeemable deed state. I’ve spoke with the county tax assessor’s office yesterday, and they offered me a website to look at what’s available for sales… what concerns me that the auction they have on the website http://www.publicans.com is that they looked like they are already foreclosed after the redemption period. It’s been frustrating to find the ones that have not been finished with the redemption period.

    • Seth Williams says:

      I hear you Vlad, that does sound like a very frustrating quandary. Unfortunately, I haven’t done much of this kind of work in TX, so I wouldn’t be the best person to show you exactly how to find the right solution here. Sorry!

  • Drew says:

    I am trying to find out how to protect the property (ie home insurance) when I purchase the tax deed. I am located in GA…does anyone have any thoughts or suggestions.

    • Seth Williams says:

      Hi Drew – have you thought about talking to a local property insurance agent? I’m sure there are probably a dozen in your area (as there are in mine) – I have no doubt they’d be happy to get you signed up.

  • Ciara says:

    Good article ! I have a question. What if the investor bids and also receives deed to a property that is occupied. Having been given a estimated value, in which was completely wrong and also has no more value then what they paid at tax sale for it. What would be the best route to get rid of property and is there anyway they can protest?
    Being an inherited the value is more in the eyes of the occupant, through hardship and inaccurate information on Redemption date of sale from the county clerk office, what should both parties do? I am the occupant and they legally obtained this property in Illinois. They were not aware this home was in such a state . Hoping it can come to an agreement .

  • Dee Wise says:

    Hello I love the article but I’m in a bit of a different situation, I’m in the process of looking at two houses that were owned by the same man but he just passed away a few months ago. In the house he lived in he was behind only 1 year in taxes and the other house he owned (right next to the one he lived in) is behind 4 years in taxes. I live in Pennsylvania which is a tax deed state but I wanted to go directly to the owner about paying off his taxes and owning the property (the house he wasn’t living in). With his unexpected passing how would I go about getting the property without waiting for the government to step in and take over. Also I’m not sure if he had a lot of family close to him that can help with this situation.

  • Herculies Smith Jr says:

    looking to invest in tax liens and property deeds sales.

  • Brad Westover says:

    Tax lien and Tax Deed investing is not an easy or a low “touch” business. This article does a really good job of explaining some of the intricacies and pitfalls. Members of the National Tax Lien Association invest in 80% of all tax liens sold in America ($4 billion) per year. For more information on this industry from a non-profit source visit: http://www.ntla.org

  • Kathy says:

    I have a dumb question, if you pay the back taxes, and there is a three year wait after the date of the tax lien sale, do you pay the next two years taxes as well when they are due? Does the state just send the bill directly to you?

    • Seth Williams says:

      Hi Kathy – it’s not a dumb question, but I’ll need more information in order to give you any real feedback. For instance…

      – Are you asking this question from the perspective of the delinquent owner, or from the perspective of an investor who is looking to buy from the delinquent owner?

      – Are you in a tax lien state or a tax deed state?

  • T. Mendenhall says:

    Oh, David,

    You actually think they’re referring to that ‘hoe’ over there (THOT)? You’re either stupid or bent – LOL

    By way, this is great info in this blog post, Sir!!!

  • Hanna says:

    The biggest breakthrough in Tax Deed Investing can be found on http://www.usataxdeedsinfo.com , we allow you to find and compare thousands of Tax Deed Properties across the USA from the comfort of your home.

  • David says:

    The ‘H’ stands for ‘Hoe’ not ‘Whore’

    Also I’m 99.9% sure Maryland is a Tax Lien state.

  • Tometta Mendenhall says:

    Interestingly, the spelling police, Patrick, mispelled/misspelt the very word pointing out your ‘error’. Honestly, folks, the Internet displays our/American’s ignorance to the entire world.

    I see ‘dummies’ parading on nat’l TV w/shirts displaying THOT as an acronym. Here’s a clue: Whore does not begin with an ‘H’. Plu-ease; my bad!!!!!!!!!!! and ‘your’ is not the contraction for you are–I see this even in ‘learned’ articles.

  • misty garrett says:

    Hi my name is misty i am new at this tax sale i bought some property on tax sale in Indiana and i like to do my own paperwork and i was wondering if you could help out on a couple things : what kind of notices i have to send and what if i just file a 137b form with the county?
    hope you can help? Thank you

    • Seth Williams says:

      Hi Misty – unfortunately, I’m not familiar with what specific forms need to be completed and filed in Indiana. Sorry about that!

  • Emogene Hill says:

    We purchased a piece of property that was 3 years of taxes owed on it. We won it for amount above the taxes because someone else was bidding. A year passed and the owner did not respond. We were given a deed and it is recorded. Now the owner claims he forgot to pay and misplaced his notice.
    We received a suit filed by his attorney accusing us of not letting him know.
    We have hired an attorney, and we filed for the suit to be kicked out.
    It has been six months since we had title recorded. How long before we can take possession? Will we have to wait on a court ruling and can we charge him rent for staying there without permission? Hope someone can help us.

    • Seth Williams says:

      Wow, that sounds like a mess. Sorry to hear about that Emogene. I’m honestly not sure how the process works in your state and/or what kinds of claims/defense you’ll have in this situation – but it sounds like you did the right thing by hiring an attorney, I’m sure they’ll be able to answer these kinds of questions for you.

  • MHC says:

    Interesting stuff… 1 comment, 1 question:

    1) My wife is completely against this strategy as in many cases you are profiting off another person’s misfortune. As Florida Native, I have heard of 90 year old couples having property foreclosed upon because they could not afford “reassessed” annual taxes that are higher than the total price they paid 50 years ago. Sure not everyone distressed tax situation is like this, but there is a very dark and borderline immoral side to this strategy that I have not seen anyone talk about on any of these sites.

    2) As someone looking for rental properties, I am looking to take ownership of the property, so how can I tell if there are liens on the property other than taxes?

    • Seth Williams says:

      Hi MHC – thanks for sharing your thoughts. I understand where your wife is coming from (I actually wrestled with this myself at one point).

      Check out this blog post, it might help shed some light on how to have the right perspective for making low offers and getting properties for pennies on the dollar.

  • Dartanian says:

    Thanks for the great article. Long time follower since your DP Podcast on flipping vacant land. I live in HI which is a redemption state (the curious hybrid). So, if the owner does not redeem within the year do I have to take any foreclosure steps to take possession? We have lots of condos here that are second vacation homes or rentals.

    Second question: What would be your strategy to avoid the auctions? Get a list of delinquent properties and send them some kind of letter proposing what exactly? Can you share some kind of hypothetical? Thanks much!

  • Pearl says:

    Hi Seth!
    Thanks for your article. I have a couple of questions that hopefully you can provide some insight to. 1. There is a property that i am interested in that has been “struck-off”. The county attorney told me the market value and then told me that i am able to submit an offer for any amount i like. What would be a good offer? A % of past taxes due? The total past taxes? And 2. There is another property that i am interested in that i can find no living owner. The taxes haven’t been paid in over a decade. Do i need to wait for the tax office to decide to auction it, or can I buy a redeemable deed before it goes to auction? I am in Texas BTW and not in any type of real estate, just love a good deal 🙂

  • Shelley says:

    Not sure I’m seeing my problem addressed: I sold on a contract, to a man who has now passed away. He left $7,000 in unpaid property taxes. No will, no estate was opened. I cannot get a certified death certificate. The County D.A. now wants to foreclose on it but states that the county gets the property to sell at auction. I thought it should could come back to me so that I could sell the building and make good on the taxes. (I have a buyer) There are no laws on the Oregon books to foreclose on a dead person who left no will or estate as I have went that route also.

    • Seth Williams says:

      Hi Shelly – it probably depends on where this property is at in the delinquency timeline (and whether it’s in a tax deed state or a tax lien state). If it’s in a tax deed state and the county has already foreclosed on it – then it’s too late, the county will be auctioned off at the next tax sale, and your best bet would be to bid on it and try to buy it back.
      If it’s in a tax lien state, you should be able to terminate the land contract (which may involve a court procedure, depending on the state) and pay off the tax lien, but even that will require some “doing” on your part.
      Have you talked to an attorney about it? They could probably give you some much better advice than I could – since they’ll know exactly what needs to happen in the state where your property is located.

  • Andrew says:

    Seth – that was extremely helpful and very eloquently conveyed! Thank you for writing such a brilliant post. I am new to the whole land investing business model and for the last two weeks i’ve been consuming as much content i can to learn about the process. This by far has been one of the most helpful articles i’ve read that helped me understand some of the specific legal technicalities!

    Keep up the great work and I am extremely excited peruse through your content 🙂

    • Seth Williams says:

      That’s awesome Andrew – thanks for letting me know (and thanks for stopping by)! I’m glad you found it helpful. 🙂

  • Martha says:

    Thanks for sharing! This is really helpful.

    Although I have a question. Since Georgia is a redeemable deem state, the prior owner “will lose all their redemption rights and the investor can rest easy knowing that they are the official owner of record” (according to this article).
    What do you mean my official owner of record? Does this mean I am now the official owner of the property?

    • Seth Williams says:

      Hi Martha… I’m not sure I understand your question. What property are you talking about? Is this something you bought at a tax sale? If so, how long ago did you purchase it?

      • Martha says:

        Sorry for not being clear. I bought a property at a tax sale, last month. According to the county I am the holder of the tax deed.

        The notice of foreclosure right to redeem says “After twelve (12) months from the date of tax sale, the purchaser at the tax sale may terminate or foreclose on the owner’s right to redeem the property by causing a notice(s) of the foreclosure to be served by certified mail to the owner of record and to all interest holders which appear on the public record. In addition, the notice of foreclosure is to be published in the county in which the property is located, once a week for four (4) consecutive weeks after the twelve months has elapsed.
        If the redemption is not made until after the notice has been given, then the cost of serving the notice or notices and publishing the notice shall be added to the redemption price to cover the cost of making the necessary examinations to determine the persons upon whom notice should be served (O.C.G.A.§ 48-4-42, 48-4-45 and 48-4-46).
        Any questions about this foreclosure process should be referred to an attorney.”

        It isn’t clear to me as the holder of the tax deed would i become the owner of the property when it is foreclosed or if the county would sell it… Thanks for your help.

  • Hanna says:

    For anyone who is interested in finding, comparing and evaluating Tax Deeds Investing opportunities all over USA Tax Deed States – USA Tax Deeds Info is Americas first and only Tax Deed Analytics Platform – We are the Ultimate Tax Deed Investing tool. New Members welcome.

  • Jennie says:

    Thank you for this informative post. I am very new at this, and have been doing some homework on where I would like to start my market, considering I have no cash to work with and this post has been very helpful.

  • Deocto Enterprises says:

    Thanks a lot for this. I’ve been studying tax deed sales in my county for almost 3 years. In so doing, I often run into things referencing tax lien sales and wasn’t sure of the difference. Everyone seems to be an expert, and few realize it all varies from state to state and even county to county.

    This year my first house (primary residence) is finally paid for and I’m either going to (re)finance or HELOC to seed my REI start up.

    I’ve been studying real estate off and on for over ten years, and even purchased the old Dolf De Roos program when I was much younger. The fact that my credit and professional life has finally reached a point to enable me to leap forward as an REI has me both over the moon with excitement and trembling with fear.

    Finding people before it goes to auction was an idea I had, but it seems like you could be met with hostility. Ever run into that?

    Not sure why I went on and on. Brevity has never been my forte. Either way, glad I found your site and I look forward to perusing it more.

    • Seth Williams says:

      Thanks for sharing your thoughts and experience! It’s not uncommon to encounter some hostility – but I think you’ll find this a possibility in just about any business… the key is in understanding how to interpret and react to those kinds of responses. I’ve got a blog post about it here that you might find interesting.

      I’m glad you found the site too. Let me know if I can help!

  • Mike says:

    Thanks for the article. A lot of good information.

  • Heather Bailey says:

    Thank you for writing this article. It has been very helpful. My husband and I are new to investing and basically deer in the headlights… what the hell do we do with all this money we just made… sort of thing. As an effort to make the wisest decision for our family, we have done nothing thus far except educate, look, explore, and educate again. We heard about tax liens and their promised  return in Alabama. Which really seems to be a great long term investment. Banks really offer nothing anymore, I can remember the long gone days when we would get 3% and I was hooting and hollering about all the money I made (It was probably like five bucks a month) but hey, we are enthusiastic people.
    Anyhow, I hope you do a follow up article on your method of investment. Your tidbit of advice has spurred much curiosity and I will ford on in search of this new found strategy!

  • Steven says:

    Seth, Thanks for all the great info! I have a question regarding tax liens/deeds. Im not interested in purchasing either liens or deeds, i am trying to follow your model and purchase the properties outright. i sent out mailers using agent Pro, but a lot of the people had properties with market values of less then 10,000$ so i was offering say 1,000 but then come to find out they had liens against the properties for 2500$. Is there a way to filter out properties like this so i dont bother sending mailers to them or to even tell if they have liens.

    • Seth Williams says:

      Hi Steven – what kinds of liens did they have on their property? Mortgages or something else?

      • Steven says:

        Seth, Im not exactly sure. i contacted the county treasurers after he had accepted the offer. This was in Colorado so its a “Tax Lien state”. The county treasurer explained that there was 2500$ that was to be paid to the Lien Holder. The property itself only had about 100$ of back taxes owed.

  • Katie says:

    Hi, I’ve been browsing through the web trying to get some info on tax deed sales in Maryland or Virginia. I’m not an investor and have no interest in profiting from a sale. I’m a single parent just trying to own my own piece of property for the first time. I’m feeling like I’m way over my head though and it sounds like investors and lawyers are dominating this whole process ?. Would I have any hope in perusing this route of owning a home free and clear of a mortgage?

    • Seth Williams says:

      Hi Katie, that’s a great question. I think it’s pretty typical to see investors and attorneys dominating the process – because this really is their realm. This is typically NOT the route that people take when they’re looking for the most user-friendly approach (and as a result, most people pay a lot more for their properties and stay in debt for a LONG, long time).

      I’m not sure if there’s an “easy” button here in terms of making the process simpler, but if you are willing to dip your toe into the “investor” realm and educate yourself a bit more on the process, I’m sure you probably could fine some incredible opportunities to own a property free and clear… but like anything worthwhile, it won’t come without a little bit of work and education.

      • Rita says:

        I’m with Katie, but I’m a grandmother who would like to find something worth repairing either to make a home or sell and move up.
        Your article was succinct, honest and helpful. I’ll keep watching for more from you. You’re clearly not afraid of hard work but keep this process as accessible as possible. Thanks,
        Rita

      • Katie says:

        Thanks Seth!
        Are there people who buy the deeds and try to turn them around quickly at a very reasonable price? If so how do I find those people? I’m really not looking to be an investor. Way to complicated for me. Lol, and I have a full time job that I love and have no plans on leaving it until I retire (13 yrs). Just looking to have a simple life on some good land to grow food and some animals to provide for me and my daughter a little more easily. Thank you so much for you input.

        • John Z says:

          Katie I purchase a 4/2 block home in 2012 for 26k all Cash
          It was turned into a Pot farm before the Police busted in the front door and trashed the place walls Doors and Closets were all removed, Drywall, Plumbing carpentry Electric repair It needed a roof and an AC The Electric had been tapped before the meter and was tagged out. I had to pay city lien of $800 for water and lawn mowing while the Property was vacant. The longer the property remains vacant the more the liens will be. $1800 for the Electric, $4000 Roof, $2700 AC. I put the walls and Doors back together and Paint and Had a CO in 2 weeks after Purchase. 5 yrs later its worth $125k I am Still living in it with no Mortgage. Prior to Repairs I got the Property appraiser to Reappraise the property for $28k and I now pay $117 a yr in Property Tax with the $25k homestead exemption. It was a good deal but a lot of work. The more Repairs you can do yourself the more you can save. Prior to purchase have the Property inspected and an estimate on repairs. Have a City, County and State lien search and a Title Search

  • Judy says:

    Nothing in your article mentions the impact to the homeowner who, for a very small amount of delinquent taxes, can be pushed into a tax lien foreclosure even before the bank forecloses. It’s predatory and disgusting.

    • Wayne says:

      Judy – most property owners do not live in these homes. I always try to work out a solution with owner occupy properties but sometimes there is no helping the uninformed.

    • Seth Williams says:

      Hi Judy, we actually don’t pursue owners who live in the properties they are selling – only absentee owners who already have a separate roof above their head.

      We’re definitely not in the business of putting people out on the street – only the local government would be so heartless as to enforce their own tax laws.

  • Patrick says:

    In your map, South Dakota is misspelt

  • don says:

    very helpful to me thanks

  • Brenda Clark says:

    Your post was awesome! It gave me great insight into this tax lien/deed business and helped me understand the difference between them. I totally get it and I will keep your information in mind if I decide to try doing this type of business. Great! Great! Great!.

    • Seth Williams says:

      Awesome Brenda! I’m so glad you found this article helpful – thanks for letting me know. I wish you the best as you continue figuring this business out!

  • quicklearningschools says:

    Hi, i think that i saw you visited my web site thus i came to “return the favor”. I am attempting to find things to improve my web site! I suppose its ok to use a few of your ideas!!

  • QuicklearningSchool says:

    Hi,
    This one is great and is really a good post. I think it will help me a lot in the related stuff and is very much useful for me. Very well written I appreciate & must say good job.

    ——————————————————–

  • Eve says:

    This is great post, awesome map! Awesome job!

    I do like your strategy on finding motivated sellers with late taxes on properties they own. Unfortunately, I have found many of the sellers who want to give out their lots for nothing are impossible to work out the deal due to the amount of taxes they own are close or even more than the market value of their lot!

    • Seth Williams says:

      I hear you Eve – that can certainly happen (I’ve encountered plenty of properties like that too). It’s all a matter of reaching out to people during the right time during their tax delinquency (and this timing isn’t always obvious the first time around).

  • Max Benjamin says:

    I am pretty much impressed by this post. Thanks for sharing such a Great post.

  • Scott Costello says:

    Sweet Post Seth! Tax Liens/Deeds have always been one of those investing techniques that has been on the fringes of my interest. There is always one guy at a meetup/reia meeting that is doing really well with them. Even though I have never been to an auction, I feel that in this day and age Auctions are a terrible place to find a deal. Ebay was a good place for deals until everyone found out about it 🙂

    • Seth Williams says:

      Thanks Scott! It took me forever to create this one, but I think the end product turned out pretty well – I’m glad you liked it.

      And I agree with you – there’s something about being able to look where nobody else is looking that makes a strategy WAY more feasible & compelling. I’ve never had good luck at auctions or on eBay… but who knows, maybe I’m just missing something.

  • Luke Sasse says:

    Have you looked for a mobile app for you public tax records? In Minnesota they recently released a mobile app that is synced with all the local public tax records and what used to be a painstaking process can now be done from my car. It has greatly reduced the amount of time I spend looking for tax delinquent properties and I can’t stress enough what a great help it has been. I no longer have to spend hours on their website or pouring through the classifieds. If you haven’t looked into it I highly recommend it.

  • Lamar Buys Houses says:

    I’m not a big fan of the tax lien/deed investing because the auctions turn into a bidding war. I’ll stick with my local marketing efforts and work off market deals.

    The idea of investing in these instruments is very intriguing but I’ve never been able to put one together.

    • Luke Sasse says:

      Have you looked at your local county website, I know in Minnesota they recently released a mobile app that is synced with the local public tax records. This allows me to prospect and look up properties from my car and I am able to develop and find a decent list of prospects in one afternoon instead of a week. If you haven’t looked at this as a possible resource I highly recommend it!

    • Seth Williams says:

      I’m right there with you Lamar. I’m sure the opportunity is there for those who wish to pursue it, but it’s just never seemed like the ripest of opportunities to me.

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