Beginner Tax Lien Questions

[Juan Santos]

I have some basic questions on Tax Lien investing that I have not found answers for. Here they are:

1.) When you win the bid at an auction, do you then have to purchase the Tax Lien Certificate separately or is the amount for the Certificate already included in the bid? I ask this because I sometimes see some starting bids at $50. Does that mean that the property owners are only behind on their taxes by $50 or does that mean that once I win the bid, I’ll have to pay for the certificate SEPARATELY than what I won the bid at?

2.) Once you own the Tax Lien Certificate, can you then sell that Certificate to whomever and whenever or must you hold it to the end?

3.) I have read that sometimes you won’t see your money back in 3 years. Is that only if the property owner takes 3 years to pay their taxes? What if they pay it in one month after you got the certificate? Will you then get your money back that month with whatever little interest it might’ve accumulated?

[Josh Carr]

@Juan Santos

1. The winning bid includes the price of the tax lien certificate.  There are smaller tax liens that only cost $50.00 because the property may not have that great of value.  Most of the time, the higher the taxes the greater the valued property.  

2.  You can sell secondary market liens and sell it to someone else if you choose to do so.  You must make sure you transfer the secondary certificate to the new buyer's name to make it official. 

3.  The first month's interest is included in the lien so unless it falls on the first day of the month you will have to wait until the next month to see any interest.  You may never see anything come back even after 3 years time which is why you need to be aware of the redemption period, once it's up, take action on a foreclosure to either force the owner to pay or take possession to the property.  If you don't want the property due to possibility of acquisition, you need to pay attention to the life of the lien.  If it hasn't redeemed in the allotted timeline you can either walk away and cut your losses or proceed with foreclosure to secure your investment.