Investors have realized the potential downfall of the stock markets, low interest rates and are looking to invest in alternate avenues. Investing in property tax liens is one such option, and is probably the most overlooked one. Though an intelligent investment can earn good returns, a wrong sale can carry a substantiate amount of risk. Every buyer, novice or veteran need to understand the potential pitfalls that comes in when they homes from people with liens on their property.

Tax lien is a situation where the city or county authorities place a lien on the property when the owner fails to pay taxes on his/her property. Liens are legal claims that say the property cannot be refinanced or sold unless the tax amount is paid. Once that is done, the lien attached to it will be removed and the property ready for sale/refinancing.

Investing in a tax lien property

The municipality or the authority is responsible for issuing a tax lien certificate when a lien takes place. It has details on the amount owned by the property, rate of interest and penalties to be paid. These certificates are then placed on auction and would be issued to the one who bids the highest. The amount on tax liens would be dependent on the size of the property. Tax liens can be purchased for as low as a few hundred dollars too. These auctions are held either physically or through an online setting. Investors who are willing to pay the highest premium at low interest rates would normally be awarded the lien.

Tips for investors looking to tax lien properties

Investors looking to buy from people who have liens on their property should first indentify the kind of property they would like. It could be a residential, commercial property or even an undeveloped land. An investor can visit the city or county treasurer to know the details about the auction. The treasurer would give the investor a list containing the details of similar auctions held within their realm, and the rules pertaining to those. Apart from a number of things, the rules would also talk about the details regarding registration, accepted payment modes and other details. All properties that have tax lien would be assigned a number and the investor would have to quote this number when he visits the county office to know more about these properties, their condition, names of owners and legal description.

Once the investor decides to buy the property, he must pay the lien amount to county/municipal office. He should then inform the property owner that the lien amount is paid and that he is now the new lien holder. It is now the duty of the owner to pay the amount and the interest to the lien holder.