What’s a Tax Sale?

Property taxes are (usually) due every year. When a property owner fails to pay these taxes, the local government can hold an auction to cover the cost of the overdue taxes. The details vary state to state and county to county. This process can take years from the first delinquent payment until the actual tax sale.

There are two types of tax sales. One is a tax deed sale, where the property and its unpaid taxes are auctioned off to the highest bidder. Before a property is available for purchase at a tax sale, the owner will be given a redemption period where they can pay all the delinquent taxes and any accrued interest to maintain ownership of their property.

The second is a tax lien sale. These auctions allow bidders to purchase tax liens on properties.

Basically, if you were to purchase a tax lien, you are paying the property taxes on behalf of the property owner as a sort of loan. When the property owner decides to pay their taxes to come out of delinquency, they must pay the full amount owed as well as any interest accrued on the overdue taxes. The county will then issue you, the tax lien holder, a check for the amount paid. Interest rates vary from county to county, but some areas charge delinquent property owners up to 10% annual interest on overdue taxes. All interest accrued is then paid to the tax lien holder.

If the property owner does not choose to pay back the overdue taxes, you as a lien holder can continue paying the taxes on the property. Depending on the area, you can then acquire the…