If you are new to tax lien investing then you may have tons of questions. To help those of you starting out, read the Q&A below from Platinum Investment Properties West, tax lien and tax certificate investment specialists.
Q: What about first mortgages and other liens?
A: Tax deeds and tax lien certificates hold seniority over any lien or mortgage (excluding city) attached to
the property and/or anyone else having interest in the property.
There are two exceptions to this rule:
1. The IRS has priority over all previous liens but limits their collection time to six months.
2. Certain states reserve their rights to take priority.
Q: Why have I not heard of these investments before?
A: Individuals have been investing in tax deeds and tax lien certificates for decades, gaining the same kind
of profits that we have already explained. Unfortunately, tax liens require a lot of knowledge and
usually the only people who invest are those already in a related field. Now, agents like PIP-West are
making this investment more popular.
Q: What are the risks and how can I lose?
A: • Invest without experience and proper knowledge.
• Hire an agent who has little knowledge and their bottom line, not your investments, in mind
• Purchase liens on useless property
• Purchase liens which exceed property value
• Bankruptcy
• IRS liens
Q: What are the hidden costs?
A: There are no hidden costs. Depending on the area we are investing, you may find that there is a $10
registration fee, or possibly a redemption fee of $15 the county assesses. Certain states/counties
require a Take Notice fees and/or Lien Assignment fees. These costs are often refunded through the
redemption process.
Q: How can I be certain you place my investments properly?
A: The Tax Deeds and Tax Lien Certificates are purchased for you, in your name. We are contracted to do
so. In addition, investment checks have always been made payable to the County government,
although the counties have increasingly been changing their processes and procedures that could
affect this method of payment for the purchases. Our procedures are subject to the rules that the
County sets.
Q: What are the costs involved with foreclosure?
A: Cost can vary greatly.
• We have foreclosed tax lien certificates for as little as $30, and for as much as $3500.
• The average cost to foreclose is approximately $1,500.
Q: What are my liabilities?
A: Prior to Maturation and Foreclosure, No Liabilities – When you own a lien, you do not own the property,
or any rights to it. Following Maturation and Foreclosure, we recommend that you treat the property
as you would your own home and protect yourself against liable matters.
Q: What if I decide to do this on my own, without your help?
A: Investing in tax lien certificates can be extremely rewarding. Unfortunately, many tax lien investors
don’t realize that you can suffer substantial losses and in some cases, complete loss if proper
research is not done prior to the purchase of tax liens.
Q: Once I foreclose or purchase a property, can I sell it?
A: Yes. Upon paying the bid price of the property, plus recording/stamping fees, you are free to do with the
property as you wish. However, we recommend “quieting” the title immediately upon purchase.
Q: What if the property I own needs maintenance?
A: As your agent, PIP-West provides you with professionals in all aspects of real estate and property
maintenance. Whether you need a lease agreement, closing statement executed, plumbing, or a home
painted, PIP-West has the ability to suit every need possible or obtain specialized services that can.
About Tax Liens
How do you invest in Tax Lien Certificates and Tax Deeds? Not many people know about this type of investment because no bank or broker has a reason to publicize it. Another reason is because the investors doing it want to keep as many of these opportunities to themselves as they can. Since not many people know anything about tax liens, to best answer the question above you need to first understand the background of Tax Lien Certificates and Tax Deeds. The government, whether it is county or state, obtains money to fund its services and improvements by taxing its residents. An owner of real property is given a payment amount, or tax, based on the value of the real property that must be paid to the government by a certain date. The county where the property is situated is where the tax is paid. If an owner does not pay the tax due, that tax then becomes a lien against the property. Essentially an investor of Tax Lien Certificates is buying past due taxes and an interest rate applied to them. Since more than 95 percent of Tax Lien Certificates redeem, this could be a great investment venture for you.
The county needs the tax money to pay for the assistance, benefits and services that they committed to give to the residents. So even though the local government may eventually get their money, that is not good enough. They have to have their tax money now. Just because someone can’t pay their taxes doesn’t stop the county from having to meet certain budget obligations. The state statute requires counties to hold a public auction and sell a Tax Lien Certificate or a Tax Deed to collect the taxes that have not been paid. If you are an investor who wants to buy and sell real estate eventually you might start by going to Tax Deed Sales. If you just want a sure rate of return then the Tax Lien Certificates are what you should focus on first. So, just begin researching Tax Lien Certificates and Tax Deeds on the internet or read some books to gradually learn as much as you can on your own. You’ll also need to check into each counties procedures as they may differ.
When you choose tax liens as the type of investment you want to be involved in, you need to realize that it’s going to be one that you have to pretty much educate yourself on and learn as you go. Once you figure out the basics it’ll get easier but it does take effort and time. So first chose a county to practice with, get in contact with the Treasurer or Tax Collector’s Office in the specified county and find out the following information: 1) date, time, and address of the next Tax Sale, 2) how to obtain a list of the tax liens that are going to be sold, 3) how to obtain the Rules of the Sale, 4) interest rate if it’s a lien sale, 5) how to obtain a list of previously unsold Tax Certificates and properties, if there were any. Call several different counties and do this as many times as it takes you to start getting the answers that you need.
Once you get this down, then go obtain the lists of Tax Liens and properties and being looking over it. Don’t be discouraged by sheer amount of properties there are or the writing next to them that don’t mean anything to you yet. If you take one parcel at a time, you will see that you’ll start to figure things out on your own and then it gets a lot easier. Remember that you just need to find the ones you are interested in buying and you don’t have to go through each individual listing to do that. After you have figured out how to read the properties you can start making a list of the ones you may invest in. Make sure you include the Tax ID number on your list, it is often given many other names; for example, the Parcel number or Real Estate number. This number will get you pretty much all the information you need on a property. Once you get property information, you can start crossing off even more properties and get a much more accurate list of what you are looking for. If you have the money you may attempt to buy more than one certificate to have a broader range of investment. If you don’t have much money to start with, that helps cross off more expensive properties on your list.
Make sure you find out as much as you can about the area of the properties you are looking into. Learn what areas are the best in town, which areas are more commercial or residential and then you will know what areas you want to look into. Once you have your list narrowed go online or to the County Land Records Office to find out more about the properties. You may find negative factors about properties or you may find major incentives to invest in a property. Don’t forget to keep in mind that there may be more than one year of tax liens linked to properties. What is your goal when deciding between what properties to invest in? Find listings where the property is valued much greater than the taxes that are past due. This way you are much more likely to be successful in your investment. The reason being that if there is much more value in the home than is owed in taxes the owner will figure out a way to pay to avoid losing the property, but if it does have to be sold it will be sold a greater profit.
After you finally have all your prospective properties picked out, you must learn how to bid in the state you want to invest in. This must be done before you attend the auction where you will actually bid. There are many different bidding processes at auctions throughout the country. For example, some states start the bidding at a rate set by the state, and each bidder bids a lower interest rate until the lowest interest rate someone is willing to buy is reached. However, you can’t assume that one auction will have the same process as another. All you have to do to find out is research it online, or call the same office where you got the listings to find out what the bidding process is. Investing in tax liens may seem complicated at first, but if you are willing and patient to put in the time and effort you will be happy with your results.
