Tax Deed vs. Tax Lien

What is the difference between a tax lien and a tax deed? Read on to find out.

First, tax liens are placed on properties by the government when the property owner neglects to pay his property taxes. The county or municipality then has these tax liens auctioned to investors. The investor whose bid is successful gets the tax lien on the property. The property owner then has to pay off the delinquent taxes on a specific time frame including the interest and penalties which will all then be paid to the investor.

Now if the owner still neglects to pay the taxes with interest, the investor is able to have the property foreclosed. But then, this only gets to happen about 2% of the time. To know how much you are getting as an investor, research about the interest rate of tax lien states and you’ll know.

Next, tax deeds are different from tax liens. When you bid in for a tax deed at an auction, know that you are bidding for property ownership. So if you do win at the auction, you will become owner of the said property. With this, you have to do longer due diligence as you would certainly not want to regret about the property you end up owning.

Though tax deeds are far more challenging than tax liens, just remember that the returns are great.

So research and learn and you’re sure on your way to discovering the secrets to real estate.

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