Every piece of real estate in the US is subject to property taxes

If these taxes are not paid then the real estate becomes “tax delinquent.” This is the first step toward tax foreclose. After foreclosure the county’s main concern is to generate enough revenue from the property to offset lost revenue. This means that properties can be bought for extremely low prices at a tax sale because the county is just looking to get the property off its books. To accomplish this, counties will look to sell ‘tax lien certificates” to investors.

Tax lien certificate can generate a return of almost 20%

A “tax lien certificate” is not equivalent to ownership interest in the property, and the delinquent property owner still owns the property. However, the tax lienholder is entitled to repayment for the amount of the tax lien plus the interest. Furthermore, if the property owner fails to pay off the lien within a “redemption period,” the lienholder has the right to foreclose on the property and tax ownership. If done correctly, a junior secured position, such as a tax lienholder, can take priority over a senior secured position, such as a bank holding promissory note.

If you are a member of Spiegel & Utrera, P.A.’s General Counsel Club and have tax related questions, call (800) 734-9900 or clubassist@amerilawyer.com for assistance. Remember, as a member of the  General Counsel Club, you receive unlimited legal, business, credit and tax advice all year long.

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