Tax Deeds vs. Tax Liens

[Shanai Rogers]

Hello! Has anyone had any experience with either of these two? Are tax deeds recommended if you are planning to wholesale the first 5 homes acquired? I've been doing research of course, but what are key differences between tax liens and tax deeds?

[Ned Carey]

If you buy a tax deed you are actually buying the property. When you buy a tax lien you don't won the property. You only own a lien against it. 

That is the most basic difference but there are lots of variations depending on state law. Some tax deeds come with a "redemption period" in which the original owner can pay the back taxes and interest and get the property back.  With most tax deeds you have to go through a separate "quiet tile" action to get title insurance to sell or refinance the property.

With tax liens, you can foreclose on the property and then you own it. Until a foreclosure is completed the owner can pay the taxes and interest and the property remains theirs.  As said above, it you are buying tax liens, most owners will pay the taxes, and you will wind up owning only a small percentage of the properties.

There is a lot written here about tax liens and deeds. Reading some of the older posts will help you understand this complex area of investing.