Tax Lien Sale Due Diligence NJ

[Gautam P.]

I will participate in tax lien sale in New Jersey. This is first time I will attempt something like this. If pros out here can answer some of my questions and concerns and any other due diligence:

- The house ARV after 2 years (in NJ 2 year is the holdup period) should be lot more than the certificate cost for current year and full tax next year.

- Should be willing to park money for at-least 2.5 years at best to get properties (most often it gets  redeemed within weeks or months)

- Property/land with EPA/environmental issue (again that may be specific to NJ) 

- Property with Federal IRS lien.

Questions:

I am not sure why properties with federal lien should be avoided. Is there way to find it out without doing full title search. Tsearch is not feasible particularly for tax lien sale where pool of properties is huge.

When the tax/utility lien gets redeemed, homeowner pays penalty on top of interest rate, who gets to keep that penalty, township or investor holding lien.

Is there risk buying lien for property whose tax lien for past year is held by other investor ? 

What are other scenario where I can loose principal except holding dilapidated house which may be worth less than principal.