You are a real estate investor or looking to become one and you know how important it is to understand all of the legalities and regulations surrounding this industry. There is a lot to learn but the good news is that you’re in the right place.
One of the things you’re going to want to know about is liens. A lien on a house is a legal claim on a property giving creditors a way to collect debts that are owed to them. A voluntary lien is similar to a mortgage and is something that the homeowner agrees to. They sign a contract and enter into the lien, which does not have a negative impact on the property, title, and homeowner’s right to title.
On the other hand an involuntary lien negatively affects the homeowner’s ability to sell their home and is hard to remove from public record. Involuntary liens are most often placed on a property because of unpaid tax bills. If there is a lien on a property, it cannot be sold or refinanced until taxes are paid. Buying and selling becomes incredibly difficult, and lenders will not approve a purchase.
Finding a tax lien property
If you decide to purchase a tax lien property, you first need to decide whether you are looking to buy residential, commercial, or undeveloped land. Contact your county treasurer to get the details on upcoming auctions. They will direct you to a list of property liens that are scheduled to be auctioned, as well as any rules for the auction.
Purchasing a tax lien property
If you are looking to purchase a home that has a lien on it, you may be able to do so by buying a tax lien certificate which allows for the government to recoup the money owed on the property. Tax lien certificates reflect the amount that is owned on a property along with any interest and penalties. They are auctioned off and sold to the highest bidder.
When bidding on a tax lien certificate, investors can bid down on the lien’s interest rate or bid up a premium that they will pay for it. Be aware that there can be a number of negatives involved with purchasing a house with a tax lien, such as the high cost of possible repairs and difficult situations like the possibility of evicting the occupants.
Buying a property with a tax lien can be a bit overwhelming, but when you follow the guidelines and regulations, you might just end up with a treasure.
If you have any questions or concerns about your property’s tax lien compliance, please contact us at Pritzker Law Group. We specialize in real estate law so you can rest assured your property transaction will be executed without issue.