If an individual does not pay their property tax, the county/city/local tax collector asks investors to pay on their behalf instead of hiring collection firms and badgering the homeowner. When the investors pay taxes, they receive a tax certificate that states that they would receive the tax they paid along with interest. The investor can make a legal claim against the property to get the tax debt, and this is a tax lien.
If you’re looking for a tax lien investment opportunity or a Maryland tax lien attorney, here are a few factors to consider:
Tax lien bidding requires extensive research. You need to make sure whether the investments, the property value, or other tax liens might hinder your transfer of the title.
Often, there are properties that the owner does not want themselves. It could be useless to them, or it could be a tiny property that is landlocked. Therefore, they decide not to pay taxes on it and prefer the local jurisdiction to take ownership. In such a situation, you need to be diligent with your research. You do not want to be stuck with such a property.
Return on Investment
Tax lien certificates pay significant interest rates. There is a fixed rate of return assigned to each certificate by the taxing authority, and until the investor is paid in full, the taxpayer keeps paying off the interest on the tax debt to the investor.
The Property’s Market Value
The taxpayer has a time frame of 6-9 months to pay off the tax debt, and if they are unable to do so, the investor may foreclose on the property in order to receive the property deed for a price well below market value.
You need to ensure you are conducting a thorough inspection of the property. You do not want to risk ending up with a property that requires extensive repairs once you receive ownership of it. You would need to check for structural damage, and whether or not it has been regularly maintained especially if it has remained uninhabited for a while. Do not get stuck with a worthless property.
You need to avoid title problems on the property. Ensure there are no outstanding liens on the property you are bidding for. Hire an attorney to conduct a title search beforehand otherwise you would need to pay off the outstanding liens before inheriting the deed.
Tax lien requires patience. The redemption period for the homeowner is 6-9 months, during which they can pay off the debt. During that time, your investment is locked, and you can not withdraw at any point.