In order to understand the tax lien certificates industry better I have wrote some must read articles, answered some questions that will give you insight and explained some important definitions. The more knowledge you have the more confident you will in buying, selling and managing your investment property.
I wrote these tax lien certificates articles to put things in perspective for you. My experience has let me see and understand I very interesting business. Being opened minded, objective and reasonalbe is the approach I took when I wrote these articles.
Here are answers to some common questions I often get asked.
Should you buy a property list? I will show you how to get the list for free. The process works in most cases.
How much money will I have to spend buying tax lien certificate or tax deeds? There is an old saying, "It takes money to make money." This is true, but if you don't have cash don't be discouraged. There are ways to get around that, this is in the course too.
Is it a good time to be buying tax liens or tax deeds? Anytime you can buy tax lien certificates or a tax deed at a deal you can sell for a deal! The word deal being the keyword. I consider getting a property at a deal when I can pay considerable lower than the fair market value for a property.
How much money can I make? This course is not intended to represent or guarantee that everyone will earn income of any amounts. Each individual's desire, dedication, effort and willingness to work will determine their own success. Real estate investing should be treated with seriousness as with any business. I am not a lawyer, CPA, or a financial advisor. I'm a guy that's showing you what worked for me with the belief it will work for you.
How much time will it take me to learn how to buy tax lien certificates or tax deeds? I didn't spend time telling you stuff so I can fill up 10 DVD's, write 5 manuals and add a bonus gift to prove that it works. Can we say, "Less is more!" I'm going to tell you everything you need to know about investing in 1-2 hour. Depending on how fast you read!
If I buy tax lien certificates or tax deeds, which is better? It really depends on what the person wants. In my opinion, in the case of wanting properties the tax deeds is better. You don't have to deal with waiting perhaps a lengthy redemption period. Some people just want the interest money making buying tax liens preferable.
Why is tax sale buying such a secret? It's a secret because the more people that know the more competition it creates! So, why am I telling you? I've discovered there are enough properties to go around. I went to one tax sale and they had over 3,000 properties. I was first like, "no way!" When I got there and got the list, it was over 3,000. They were selling properties for 7 counties at 1 time. The tax sale took all day.
I make it sound so simple. Can I really be successful? Actually, it wasn't simple for me because I didn't have all the necessary knowledge or a mentor. I just read information online and from the library. I learned as I went, which was just enough to be dangerous and I lost money! I believe anyone can do it if they are thorough, have the best information, a plan and access to a knowledgeable person.
Is buying tax liens easier than buying tax deeds? In my experience, it's easier to buy tax deeds. Buying tax liens is a more tedious process.
Do you know the answers to these tax sale buying questions? Should I use a IRA or my 401k as a tax shelter? Do I pay the taxes during the redemption period?
I'm always willing to help and answer anyone's question about tax sale buying. Most people call me and ask me questions about how to buy tax lien certificates. The mistake they make is thinking they now know everything. I always say, "I don't know what you don't know. I'm just answering the question you ask me. If you have never done this before how do you know that you know everything you need to know to give yourself a chance to be successful?" Anyway, that's something to think about.
County Tax Sale depending on the state the sale may be selling tax lien certificates and tax deeds.
Tax Lien State is the county in which a property is located sells the lien certificates at a sale or auction. Some states sell the lien for the delinquent amount while others allow bidding to begin at that price. The purchaser of the tax lien collects interest (predetermined by the state) from the home owner on the amount that was paid for the tax lien. If the tax lien (with interest) goes unpaid during the redemption period, the investor may foreclose on the home. Unlike most foreclosures, when a tax lien is foreclosed on, all other liens and mortgages are abolished and the property would be owned "free and clear". Typically the lender will pay off the tax lien to avoid losing their house and/or property.
Tax Deed State is the county government that sells the deed to the public sale or auction. The benefit for investors is the ability to buy property at discounted rates, often for the amount owed in taxes. When an account becomes delinquent, that property is listed at the tax assessor's office, some are even online. Properties with homes are usually bought by investors (often referred to as sharks) prior to foreclosure.
A Tax Lien is a lien imposed by law upon a property to secure the payment of taxes. It may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes.
Tax Lien Certificates (TLC's) represents the outstanding taxes on a property. Many county governments sell the TLC's to investors so that the county may recoup the delinquent taxes. In exchange for the purchase, county governments offer the investors interest on those TLC's and the guarantee that those TLC's will be paid off within a predetermined period of time. Interest accrues on the TLC's over a specified course of time until the taxes are paid. TLC's are the first position lien (Senior Lien) on properties. In most states, if a property owner does not redeem the TLC's within a specified time period the holder of the certificates can ask the county government to begin procedures to auction properties to the public. Proceeds from the auction will pay off the TLC's Holder(s).
Tax Lien Sale is a sale conducted by a governmental agency, of tax liens for delinquent taxes on real estate. The lien consist of unpaid real estate taxes, assessments, including penalties, advertising costs and fees. If the property owner fails to pay the delinquent taxes during a specified period of time, the county government can sell what is called a Tax Lien Certificates on the properties.
Tax Deeds Sale is the forced sale, conducted by a governmental agency, of real estate for nonpayment of taxes. It is one of two methodologies used by governmental agencies to collect delinquent taxes owed on real estate, the other being the tax lien sale.
Quit Claim is a term used to describe a document by which a person (the"grantor") disclaims any interest the grantor may have in a piece of real property and passes that claim to another person (the grantee). By contrast, the deeds normally used for real estate sales (called grant deeds or warranty deeds, depending on the jurisdiction) contain guarantees from the grantor to the grantee that the title is clear. The exact nature of the warranties varies from jurisdiction to jurisdiction. Quitclaim deeds are sometimes used for transfers between family members, gifts, placing personal property into a business entity, to eliminate clouds on title, or in other special or unusual circumstances.
The most common use for a quitclaim deed is a divorce in which one party is granting the other full rights to, and eliminating any interest in, a home in which both parties held an interest. If a husband and wife own a home and divorce, and the wife acquires the home in the decree, the husband would enact a quitclaim deed to eliminate interest in the home.
Quitclaim deeds are also typically provided in cases of tax deed sales where property is auctioned off to pay outstanding tax debt. The auctioning body is usually a local government, which claims no interest in the property whatsoever, but is selling it only to recover the back taxes.
Warranty Deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee (buyer). The guarantee is not limited to the time the grantor owned the property - it extends back to the property's origins.
Clear Title is the phrase used to state that the owner of real property owns it free and clear of encumbrances. In a more limited sense, it is used to state that, although the owner does not own clear title, it is nevertheless within the power of the owner to convey clear title. For example, a property may be encumbered by a mortgage. This encumbrance means that no one has clear title to the property. However, standard terms in a mortgage require the mortgage holder to release the mortgage if a certain amount of money is paid. Therefore, a buyer with enough money to satisfy both the mortgage and the current owner can get clear title.
Title Search is a process that is performed primarily to determine the answer to three questions:
Anyone may do a title search and documents concerning conveyances of land are a matter of public record. However, it is often the case that people choose to contact a title company or attorney to conduct an exhaustive title search. For example, a title report may also show any easements, or recorded legal rights to the property or portions of the property. A previous owner may have legally given a neighbor the right to share the driveway, or the city may have a right to strips of that property for putting power lines, communication lines, water pipes, or sewer pipes. A few on-line services offer title searches for relatively little cost, and their accuracy is not inferior to what a title company or attorney will offer; however on-line businesses rely mostly on electronically available information, and for that reason could at times be limited.
In the United States, the buyer of a property will usually purchase title insurance, which protects the buyer from any title problems that may arise after sale (such as liens that were missed during the title search). The title insurance company issues a report and issues an insurance policy in support of its findings. However, title searches are most often carried out before contracting is completed between parties and sometimes during the escrow phase of a closing.
A title search is also performed when an owner of a certain real property wishes to mortgage his property and the bank requires from owner to insure their transaction.
Generally, there are two main types of title searching, a full coverage search and limited coverage search; other types include non-insured reports and foreclosure guarantee search.
Fair Market Value (FMV) is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the real estate market. An estimate of fair market value may be founded either on precedent or extrapolation. Fair market value differs from the intrinsic value that an individual may place on the same asset based on their own preferences and circumstances.
Definitions Excerpt Source: Wikipedia
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