Many of you may wonder exactly what a tax certificate is. Many of you may have heard the term but have no idea what it means. A tax certificate is issued when a home or land owner does not pay their taxes for a specific year. Once the taxes become past due, a tax certificate is issued and may be purchased at a tax certificate sale. The tax certificate includes the amount of the taxes and any penalties that the homeowner has incurred. The sale of the tax certificates enables the county to get much needed funds to run the county and offers the investor a safe investment at a good interest rate, perhaps as much as 18% or more. The home or land owner can redeem the tax certificate and bring themselves current by paying the amount of the tax certificate and whatever interest has accrued. This amount is paid to you as the tax certificate holder. Most of these tax certificates end up getting paid off within twelve to twenty four months, making them a good safe investment for you.
Depending on what state you live in, there is a specific timeframe in which you can file for a tax deed if the home or land owner doesn’t “make good†on their taxes. This tax deed supercedes all other liens except for certain government liens, like the IRS for example. If you file for a tax deed and you get it, you must then file for “quiet title†on the property since the quit-claim deed you received when you got the tax deed is non-insurable by the title company if you sell the property. This is not a very expensive process considering the amount of profit you can make on a deal if you sell a property you purchased from a tax deed sale. Most often though, you will find that you end up getting paid on most of your tax certificates within a twenty four month period.
Before the tax certificate sale takes place, the county must issue a list of the tax certificates to be sold for a period of three weeks before the sale. This is the list you would use to choose the tax certificates you want to buy at the sale. The sale itself is done in reverse auction style, where they begin at the top interest rate and you bid the interest rate down until someone wins the bid. At the end of the sale, you would pay for all the certificates you purchased during the sale.
Another excellent use for these lists is to use it to market to the owners of properties whose taxes are past due. I will include more information on this technique in part two of this article. Watch for more information next week.
In the meantime, for more information on tax certificate and locating motivated sellers for your real estate business, visit my website at marketingmagiclady.com