Junior Tax Liens

[Crystal Harris]

In February 2024, I purchased a tax lien from Nassau County NY. A few months later, I received a notice to redeem letter from a 2019 tax lien holder. The owner has until November 29 2024 to pay the 2019 tax bill or the tax lien holder can start the foreclosure process. It wasn't until then that I realized that I purchased a junior tax lien. 

Would my tax lien be extinguished if the homeowner fail to pay?

Is there anything I can do to protect my investment?

[Chris Seveney]

Quote from @Crystal Harris:

In February 2024, I purchased a tax lien from Nassau County NY. A few months later, I received a notice to redeem letter from a 2019 tax lien holder. The owner has until November 29 2024 to pay the 2019 tax bill or the tax lien holder can start the foreclosure process. It wasn't until then that I realized that I purchased a junior tax lien. 

Would my tax lien be extinguished if the homeowner fail to pay?

Is there anything I can do to protect my investment?

It depends. The senior tax lien forecloses and the proceeds from the sale would first go to them to pay them off, then would go to you as the junior lien holder etc. 
Just like a junior mortgage, the senior gets priority and remaining balance would then go down the order of priority.
hope this makes sense.
Note; I recommend reviewing this with an attorney as well as I am not one.

[Don Konipol]

Anyone investing in a product new to them is never going to have perfect knowledge going in; extensive knowledge is accumulated over time, and, well, if you wait for perfect knowledge you’ll never invest.  However investing in DIRECT real estate investments differs considerably from investing in mutual funds, index funds, bonds, money market and REITs that most investors are familiar with.  Directly investing in real property investments, whether property, notes, tax liens, or leases requires a THOROUGH understanding of all LEGAL aspects concerning real estate law in general and the investment in particular.

It’s IMPOSSIBLE for someone who hasn’t accumulated either a legal education in real estate law or 20 years active experience to have the knowledge and understanding of legal aspects sufficient to reduce legal risk to an acceptable level when investing directly in tax liens, notes or real property.  Here’s what I believe everyone except maybe the most experienced investor should do BEFORE committing to invest directly

1. Perform a deep dive research into all legal aspects of the specific investment.  Depending on the investment and your current knowledge, this can take from 2 to 20 hours of research.

2, Spend $400 - $600 for 2 hours consultation with an attorney who specializes in real estate IN THE STATE that the underlying property is located in.

3. Develop an itemized list of the various risks specific to your proposed investment, and the cost to you of each.

4. Determine how much money would be needed to handle each risk, and determine if you have sufficient liquidity / cash flow to ensure you can “stay in the game”.

This is of course in addition to all normal “due diligence”, financial forecasting, etc.