Tax Lien Investing — Buying and Selling Tax Liens

20image4%20%282%29.jpg /% SGBIZSERVICES, INC buys and sells a variety of Tax Lien Certificates. We currently buy/sell Tax Lien Certificates in FL, AZ and CO but are eager to seek out other States as well. We have much information to offer to Prospective Tax Lien Investors and have a Powerpoint Video available and also can make arrangements for speaking engagements and consultations in the subject area such as the Pros and Cons of Tax Lien Investing, the Risks vs. Rewards, How to Start Investing and more!

Tax Certificate Article — Click Here to Read

The Basics of Tax Liens are that:

A Tax Lien Certificate is a first lien on delinquent property that yields the holder of the certificate high interest rates and is issued by either a County or also the IRS (which is called an IRS Federal Tax Lien)

In most jurisdictions, when a property owner is late on paying real property taxes, the county or municipality will issue a tax lien on that persons property. Certain states allow the tax lien to become a first lien on the property, which is then turned around and sold at auction as a tax lien certificate.

After placing a successful bid, through an online or in person auction buyers of a government-issued tax lien certificate will then get one of two things:

1. A state-mandated yield from the lien, which the delinquent taxpayer must pay in order to release the lien, OR
2. Title to the property (after a certain amount of time, set by the jurisdiction) if the delinquent taxpayer fails to pay up.

Individuals have been investing in tax liens sales more and more because of these two benefits. A fixed percentage rate, mandated by a government agency, or the title to property at a substantial discount are incredible benefits rarely seen with other real estate transactions.

The 2 types of Tax Liens are further described below. Please call our office to discuss how we can help you get started in investing in Tax Lien Certificates and how to buy and sell tax liens.

Unlike personal debts, tax liens on real estate run with the land; that is, a property owner becomes responsible for payment even if the tax obligation was incurred by a prior owner. Depending on the law of the state or jurisdiction, the owner of the property may also be personally liable for payment of the taxes.

Payment of a tax lien may occur through various methods:

• Payment may be made directly by the property owner or, in many cases, indirectly by the mortgage holder using an escrow account. Notice is given both to the property owner and mortgage holder when a property tax is delinquent; thus, even if the property owner does not have an escrow account on the mortgage, the mortgage company will receive notice of the delinquency and may pay the tax. The mortgage company will then demand repayment from the owner/borrower and/or create an escrow account to recoup the proceeds, since the mortgage company might lose some of the value of its mortgage lien if the property were sold by the taxing agency to satisfy unpaid taxes foreclosure.
• If a property is sold by the owner prior to tax foreclosure by the government body, the tax lien (which is generally discovered as part of a title search) is usually paid as part of closing costs from the sale proceeds.
• Procedures vary from state to state. Generally, in the event a tax lien on personal property is not paid within a specified time (and after several notices are generally given), the property may be seized and sold at foreclosure sale. On real property, one of two methods may be used: either the property may be seized and sold (a tax deed sale), or in some States the tax lien may be offered to investors (in the form of a tax lien certificate) with an accompanying right for the investor, after a specified period of time, to institute foreclosure proceedings (a tax lien sale).

20image4%20%283%29.jpg /%Federal Tax Lien Basics:

Sec. 6321. LIEN FOR TAXES.

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belong to such person.

Internal Revenue Code section 6322 provides:

Sec. 6322. PERIOD OF LIEN.

Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time.

Perfection of federal tax liens against third parties (the Notice of Federal Tax Lien)

A federal tax lien arising by law as described above is valid against the taxpayer without any further action by the government.

The general rule is that where two or more creditors have competing liens against the same property, the creditor whose lien was perfected at the earlier time takes priority over the creditor whose lien was perfected at a later time (there are exceptions to this rule). Thus, if the government (which is treated as a creditor with respect to unpaid taxes) properly files a Notice of Federal Tax Lien (NFTL) before another creditor can perfect its own lien, the tax lien will often take priority over the other lien.

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