A lien is placed on a property by the local tax departments after its owner fails to pay the property taxes. It is a legal claim by the local county or city for the unpaid property taxes. A property with a lien attached to it can be sold or refinanced only after paying the unpaid taxes. Properties with the tax liens are sold through auctions. Another way tax authorities recover unpaid taxes of such properties is by auctioning only the liens. Tax lien home buyers looking for such deals should check the websites of local property tax collecting departments.
There are two ways local governments recover unpaid property taxes from homes with a pending lien. The first is the tax lien sale under which only the lien is sold through an auction to the highest bidder. The winning bidder gets the right to collect the lien plus interest from the property owner. If the property owner fails to pay the dues, the new lien owner can initiate the process of property foreclosure. Tax deed sale is another option that local authorities use to recover unpaid property taxes. In this type of sale, the property with unpaid taxes is sold at an auction. Both options present home buyers an opportunity to buy a house with tax lien.
Under the property tax lien laws, the homeowner can be forced to pay unpaid taxes through the tax deed sale. The property is sold through an auction to recover the tax dues. Each state’s local government has a different way to recover the unpaid taxes through this process. Once a property owner fails to pay the taxes pending against the property, the tax collectors initiate the tax recovery process. The homeowner is served a notice for paying the taxes. Depending on the local tax laws, the owner is allowed a few months or even a few years to pay the pending dues. If the pending taxes are not paid within this waiting time, the tax collector initiates the sale of lien or property through an auction.
If only the lien is auctioned, the highest bidder wins the lien and gets the right to recover it from the homeowner. The tax department uses the money collected this way to clear the unpaid taxes. The homeowner is required to pay the new lien holder the unpaid amount plus interest, or face property foreclosure. Tax lien home buyers get instant ownership of the property if they follow the route of the tax deed sale. They get complete ownership of the property. Homebuyers planning to buy such a house should educate themselves on this subject before proceeding.
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