What About Government Issued Tax Lien CertificatesOne of the methods that states use to collect overdue taxes on property are government tax sales. These can be of two types: tax deed sales and sale of tax lien certificates. Every state uses either one or both types of sales to recover unpaid property taxes. The government tax lien certificates are sold in an auction. The value of the certificate depends on the amount of taxes which are owed to the state together with accumulated interest and administrative charges. The way in which the tax lien certificates are sold differs according to the laws applicable in that particular state. In some states the certificates are sold at face value while in others investors get an opportunity to bid on them. Bidding can also take place on the basis of interest rates, with the lowest interest bid being considered the winning bid. By buying government tax lien certificates the investor is actually paying the lien off on behalf of the property owner and in the bargain earning a high rate of interest and the possibility of acquiring the rights on the property. Once a person acquires a government tax lien certificate, the owner of the property is obliged to pay back the lien and its associated costs to the investor and not the government. However if the errant tax payer does not clear the lien, the investor can choose to foreclose on it and thereby acquire the rights to the property. The transaction is profitable for both the government and the investor. On the one hand the government authority or the taxing jurisdiction gets the opportunity to recover unpaid taxes on real estate without actually waiting for the delinquent tax payer to clear the debt. On the other hand, investors buying government tax lien certificates find it profitable as they can earn very high rates of interest when the property is redeemed. Even if the errant tax payer is unable to pay off the lien and the property is put up or sale, the investor can buy the property at a fraction of its market value. Thus when deciding to invest in government tax lien certificates the investor has to first find out which states use tax lien certificate sales. In addition some research has to go into finding out about prevailing rates of interest, redemption periods, penalty rates and other relevant information. It is only when the investor is armed with adequate knowledge that an informed decision can be taken. Information on government tax lien certificates can be obtained through the federal machinery as well as from the internet. Many professional organisations also offer manuals and information booklets giving the details related to each state. |