Tax Lien’s Major Disadvantage

By dhinternational  /  May 9, 2011 / Comments Off on Tax Lien’s Major Disadvantage

Tax Lien Sales Disadvantage

Tax Lien Sales Disadvantage

Purchasing tax liens include a major disadvantage – the lack of liquidity. Now, this means that it will not be so simple to sell the investment and quickly turn it into money. It will be quite hard than bonds and stocks.

With tax liens, you have your interest in the lien assigned to another individual. This would be a document that has to be recorded by the taxing jurisdiction. With this, you will have to find someone who will want the tax lien certificate you just bought.

One great suggestion during the tax lien auction would get all the contact details of those who have also bid on the tax liens you bought so you can go to them if ever you need to liquidate your portfolio. You can also opt to go to some institutional firms that would want to buy liens. Also, you can also prepare for a proper due diligence package fit for your buyers.

When attempting to have your liens sold, expect them to be sold at discounts. Take note that this would not mean that you are losing, it will always depend on how long you have the liens but most likely, you are going to be selling them in a discounted price. Why, you ask. Well, for the reason being that the buyer will have to get a substantial expense in having due diligence verified and they will need to have that expense back which is discounted. Also, they will have a criteria that is more stringent as to what they are going to buy and they may get the feeling that your portfolio can be a lot of risk than they are acceptable the return whatever your portfolio yields.

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