Tax Lien Certificates?

What can you tell me about Tax Lien Certificates?


Seriously. People like to tout the potential returns, but there really isn't that much $$$ to be made in most cases.

What exactly are they?

How much do they cost?

Any websites?

They are liens placed on someone's real estate for not paying their RE taxes.

They are usually bid on--which means you must know exactly what you are willing to pay and what rate of return you want.

Seriously, don't even bother. There are so many other, safer, and smarter ways to invest money that tax liens are pointless UNLESS you are a fairly sophisticated real estate investor and you already have a healthy portfolio of cash,stocks and bonds.

You go to any town and find out when they are auctioning the back taxes. You then bid against other bidders to pay the back taxes. You bid only one thing, the interest rate. The lowest bidder gets to pay the back taxes in full. The owner of the property has two years to pay you the back taxes plus the annual interest rate you bid. After two years, if they haven't paid you the taxes and interest, you move to go to foreclosure which means more expense. Now you have to wait for a court date. You now get to own the house if you win except there probably is a mortgage against the house, now you have to pay the mortgage company off if you want the house because they have a lien against the house otherwise the mortgage company pays you the back taxes plus interest and they keep the house. If the original owner of the house hasn't made the mortgage payment, then the mortgage company can file for foreclosure. When they oown the house in court, before the deed/title can transfer to them without encumberment, they must pay you the back taxes plus interest. Tax liens are only for people who can afford to tie up their money for 3 years.

Worth, don't the laws regarding tax liens vary from state to state as well? I know Mass (where I live) will auction them , but I think other state have other procedures.

I'm in New Jersey. I was quoting NJ laws but the procedure may be similar in other states. The two main keys are, you tie up your money for possibly a long while, you may be forced to spend money to force a foreclosure (and you probably won't own the house afterward), and the lowest bidder for the interest rate gets it which is unusual for auctions, normally the highest bidder gets it.