Tax Lien Certificate

As per the Tax Lien certificate meaning, it is referred to as the certificate of claim against some property having a lien placed on it due to unpaid Taxes.

Tax lien certificates get usually sold to the investors through some auction process.

Understanding Tax Lien Certificate

As per the meaning of the tax lien certificate, it implies some lien that has been placed on the respective property as you might not have been paying the given taxes. Every time the property tax would be appearing as due, the municipality will go forward with issuing the tax lien. When you are used to paying the taxes on time, the lien gets removed. When you are not paying the taxes, or not paying them on time, the respective town would auction off the given tax lien certificate to the investors. The investors would then pay of the entire taxes on behalf of the owner of the property tax.

How are Tax Lien Certificates Sold?

The municipality or town of the location of the property is usually known to conduct the sales auctions for the tax liens. For your property to be eligible, it should be regarded as tax-defaulted for the given minimum period on the Basis of local regulation. Rather than bidding on the property’s amount, the interest parties go forward with bidding on the respective interest rate they would be ready to receive. The investor responsible for bidding the lowest rate is known to win the given auction while being issued the respective tax lien certificate.

What Happens on Buying the tax lien certificate?

Once the investor ends up placing the winning bid for the given tax lien certificate, the lien gets placed on the given property. At the same time, the tax lien certificate gets issued to the investors who would be detailing the outstanding penalties and taxes on the given property. It is important to note that not all towns or states would offer the given tax liens. There are some states or towns that would only be performing tax sales on the defaulted property. This results in the winning bidder becoming the legal owner of the given property.

The phrase tax lien certificate is known to generally Range from a period of 1-3 years. The given certificate is known to allow the investor to ensure collection of the unpaid taxes along with the prevailing interest rate that is applicable. This could range from 8 to over 30 percent on the basis of the given jurisdiction.

Given momentum by the high interest rates as mandated by the state, tax lien certificates are known to offer return rates that tend to be comparatively higher in comparison to the ones that are provided by other forms of investments. Tax liens are usually known to have precedence over other types of liens like mortgages.