The word “tax” alone is enough to make some people have a bad day or get cross-eyed. However, in this instance you might be interested in knowing about government foreclosures as it could benefit you or cause you to lose your home or property.
Foreclosures do not happen only when one defaults their mortgage payments. They can also occur when a property owner fails to pay property taxes which have been set in place by the federal or state government. When this happens, the government repossesses the house and the foreclosure is described as a tax lien foreclosure.
A tax lien certificate basically shows that one has been given the right to tax lien on the property. This means that you pay the taxes on behalf of the property owner to prevent their property from being foreclosed by the government. Therefore, the property owner then owes you the money which they have to pay back. One is allowed to charge the property owner up to 18% interest rate on their repayment.
Investors must note that when one purchases property which is a government tax-lien foreclosure, they do not automatically own the house until after three years after the signing of the lien certificate. This is to give the property owner ample time to buy back their property. If the property owner is unable to repay the money, the buyer gets to keep the property. Therefore, whichever way one looks at it, it is a win-win situation for the buyer.
When buying government tax foreclosure homes, the prices of the properties can be really low. This is because the price is meant to cover only the amount of tax that the owner has defaulted to pay on. This can make the property sell up to 60% less its market price.
Government foreclosures are usually sold at auctions. You can get listings of these properties from various websites. Potential buyers should know that it is important to examine the property before buying it. However, they should also note that it is not possible to examine the interior of the house before it is auctioned. One can only examine the externals of the property and the neighbourhood.
