States are usually
have either Tax Lien Certificates (New Jersey) or Tax Sale
Deeds (North Carolina).
In most jurisdictions, when a property owner is late
on paying real property taxes, the county or municipality will issue
a a tax lien on that person's property. Certain states allow
the tax lien to become a first lien on the property, which is then
turned around and sold at auction as a tax lien
certificate.
After placing a successful bid, buyers of a
government-issued tax lien certificate will then get one of two
things:
1) A state-mandated yield from the lien,
which the delinquent taxpayer must pay in order to release the
lien, OR
2) Title to the property (after a certain
amount of time, set by the jurisdiction) if the delinquent
taxpayer fails to pay up.
Tax Lien Certificates
Tax Lien Certificates are A
"certificate" or notice of claim against property that has a lien
placed upon it as a result of unpaid property taxes. A tax lien
Certificate usually entitles the holder to a set rate
of interest on the tax due. After a substantial waiting
period (2 years in New Jersey, 3 years in Arizona) without
the taxes being paid, a Foreclosure lawsuit may be started to get
ownership of the property. A tax lien holder has no
right to entry of possession of the property until the
certificate foreclosure is completed. Any
unauthorized entry onto the property could be considered trespass
subject to criminal and civil penalties. For example, Pinal County
Arizona warns:
It should be understood that the Treasurer is offering for
sale and you are purchasing a TAX LIEN
on the property only. You have no right to enter upon, build on, or
sell this property until you have obtained a deed
Tax Lien Certificates are not insured or
necessarily backed by property and therefore are very
risky!
Some of the risks include Bankruptcy delays; Damage or
destruction of the property; Environmental contamination; Valuation
of the underlying property; Foreclosure by a subsequent tax lien
holder; Loss of premium if foreclosure is not completed within five
years; and Morality issues relating to foreclosing on someone's
home.
Tax Lien Deeds and
Foreclosures
Foreclosure Sales are properties sold due
to delinquent tax liens. The County opens bidding at the
amount equal to taxes plus legal costs. Anyone may offer an
amount over the County's bid and obtain ownership upon completion of
a 10 day upset bid period.
Phase 2: County
Auction parcels have already completed the tax
foreclosure phase and the property is currently deeded in the
County's name. These parcels will be offered at auction.
If no one offers a bid at this auction, these properties move into
the surplus property category (see below).
Phase 3: Surplus Properties are parcels that have
completed both the tax foreclosure sale and the County Auction
process without a bid. These parcels may be purchased directly
from the County by submitting a written offer, or by completing the
"form for bid" located on the Surplus Properties Page
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