Last week we talked about Federal and State Tax Liens. If you recall we said, “A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes.” In essence, a tax lien is the government’s claim against all or some of an owner’s assets based on a failure to pay a tax debt on time.
So here’s a question: I am looking at buying a house, but I discovered it has a tax lien against it. Should I drop consideration of the house?
You are legally free to buy a house with a tax lien on it, but you run the risk that the government can come in and seize the property to satisfy the lien. Keep in mind, though, the only thing you can purchase is the previous owner’s right to the house, which means you step into the shoes of the previous owner. Therefore, the tax lien stays attached to the property even if the delinquent taxpayer, the previous owner, no longer owns the property.
There is another way to invest that involves tax liens.
Investopedia writes, “When a lien is issued, a tax lien certificate is created by the municipality that reflects the amount that is owed on the property plus any interest or penalties that are due. These certificates are then auctioned off and subsequently issued to the highest bidding investor. Tax liens can be purchased for as little as a few hundred dollars for very small properties, but the majority of them cost much more.
Investors who purchase property tax liens are typically required to immediately pay the amount of the lien in full back to the issuing municipality. The investor must then notify the property owner that they are now the lien holder. The property owner must repay the investor the entire amount of the lien plus interest, which can range anywhere from 5 to 36% (the rate will vary from one state to another). If the investor paid a premium for the lien, this may be added in to the amount that is repaid in some instances.
The repayment schedule usually lasts anywhere from six months to three years, and in most cases the owner is able to pay the lien in full. If the owner cannot pay the lien by the deadline, then the investor has the authority to foreclose on the property just as the municipality would have (although this is a fairly rare occurrence.)
We are Styl Properties, Inc. here to help homeowners out of any kind of distressed situation and potential homeowners find their dream home. As investors, flippers or rehabbers, whatever you choose to call us, we are in business to make a modest profit on any deal, however we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the simple honest truth about your home and how we can help you sell it fast to resolve any situation.
Give us a call today at 402.909.0686 to let us know what YOU need help with!