Benefits and Risks of Tax Liens

By dhinternational  /  July 13, 2011 / Comments Off on Benefits and Risks of Tax Liens
Benefits and Risks of Tax Liens

Benefits and Risks of Tax Liens

Here are the benefits of tax liens:

1.) Tax liens are high priority liens. They take precedence over mortgage liens, trust deeds, judgment liens, and more.
2.) Right to collect interest and right to foreclose. You see, if the tax lien is redeemed, you can collect large returns. However, if the delinquent property owner is not able to pay it off, you can foreclose and may get full property ownership rights.
3.) No need to chase up payments. This is the county’s responsibility so you need not worry.
4.) Tax lien investment is secured. Tax liens are usually for small fractions of the market value of the property.
5.) You are not subject to land owner liability.
6.) High interest rates. Rates may go from 16% to 24%.
7.) Low risk.
8.) Low maintenance.

Now, let’s take a look at the risks and things you need to do when you invest in tax liens:

1.) You will need to assess the property. You will need to go see the property itself even if you are just purchasing the tax lien as the value and security of the tax lien is based on the actual property.
2.) The property’s market value. Factors such as location, zoning regulations, flood paths, city restrictions, etc. affect the value of the property’s tax lien. You will need to research on these.
3.) Some states have the property tax liens share equal priority with state tax liens and federal liens. You will need to research for liens that may have survived on the property.
4.) If the delinquent property owner is also bankrupt after you have purchased the lien, there are cases wherein the tax lien payment has to wait until all the administration expenses have been paid off.
5.) There could be delays in foreclosure if the tax lien is done by the FDIC (Federal Deposit Insurance Corporation) so always check if this is your case.

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