| Tax sale jargon can be extremely confusing. There | | | | wipe out the mortgage and own the property free and |
| are tax lien sales and tax deed sales. As if that wasn't | | | | clear! Isn't that great! On top of that, you are making an |
| confusing enough, there are also hybrid sales called | | | | interest rate that is much higher (as much as 24%) |
| redeemable deed sales. Once you understand the | | | | than what the mortgage company is collecting. |
| differences, you can wade through this goldmine and | | | | Now that you understand the basics of tax liens, let's |
| make huge profits! | | | | review tax deeds. In the case of the tax deed, the |
| Tax liens are simply a lien on the property. From the | | | | county simply holds the lien for several years and |
| homeowner's perspective, you are simply a creditor, | | | | does its own foreclosure. Then, they hold an auction |
| much like the mortgage company. Mortgages and liens | | | | and you buy the property. It's very similar to a |
| are in what are called "positions." The big loan that you | | | | traditional mortgage foreclosure auction. |
| got when you bought your house is the first mortgage, | | | | The third type of tax sale is called a redeemable deed |
| and usually has a very low interest rate. If you did an | | | | sale. The most notorious redeemable deed state is |
| equity line or borrowed additional funds, then you also | | | | Texas. In Texas, the investor buys the property at the |
| have a second mortgage. Second mortgages are | | | | tax sale, but the homeowner has a specified period of |
| always at a higher rate than the first mortgage | | | | time (six months to two years, depending on the type |
| because the lender takes more risk. In the event of | | | | of property) to buy back, or "redeem" their property. In |
| foreclosure, the lienholders are paid off in the order of | | | | the meantime, the investor can take possession of the |
| position, which means that the first mortgage holder is | | | | property and even rent it out. In the event of a |
| paid before the second mortgage holder. | | | | redemption, the investor gets a very nice 25% annual |
| So, what does this have to do with tax liens? The | | | | rate on their investment in Texas. |
| position of tax liens is even higher than mortgages. If | | | | As you can see, tax liens and deeds vary greatly by |
| the homeowner refinances, the tax lien must be paid. If | | | | state. Before making any kind of investment like this, |
| the homeowner sells, the tax lien must be paid. | | | | proper research of state and local regulations is |
| If you foreclose on your tax lien and the mortgage | | | | essential. With the proper tools, a massive goldmine |
| company does not pay off your lien, then you could | | | | awaits. |