Have you ever wondered what happens when someone does not pay their property taxes? Well if you know government officials then you know they are not going to give a slap on the wrist and say ‘that’s okay, but don’t let that happen again’. Rather the government has the power to foreclose homes and commercial property when taxes are not paid. It does sound like the ultimate nightmare for the homeowner but it is not bad at all. In fact as Alec Baldwin would say in one of his notorious movies, it’s a ‘win-win’ situation. Let me explain.

County governments hold what is referred to as ‘tax lien sale’ which is a public auction where people can bid on these tax sales in lieu of the property. What this means is the public is bidding on the debt of the homeowner. In exchange for buying this tax lien and paying off the homeowner’s debt, the homeowner will then pay the winner of the auction back, with interest, by the redemption date as predefined by the government. This redemption date can be a length of time between 6 months and 4 years.

Now here’s the catch for the homeowner. If they default on the loan terms then the lien purchaser (let’s assume that is you) has the right to foreclose and take title of the property. So it is a ‘win-win’ so long as the homeowner continues to pay you, as the lien certificate owner, all loan payments. For you it is a good way to make a high interest rate while helping someone from losing their home. Read the rest of this entry »