Seven Things to Know About Buying a Home with a Property Tax Lien

You discover your dream home, but it comes with an unexpected twist—a property tax lien. Should you walk away?

You might be tempted to, but there’s more to the story than meets the eye. Properties with tax liens can prove to be beneficial for investors and homebuyers alike. However, it is necessary to go into the process fully informed so please read on.

What is a tax lien on a property?

If the government has issued a tax lien against a property it means the owners are negligent in paying their property taxes. This legal claim follows the property. If the state and/or national tax lien remains unpaid, the government can auction off the tax bill to investors as a tax lien certificate. Investors earn their money back with interest when the property is sold or the tax bill is settled. If the owner doesn’t pay the taxes back, the investor can obtain the property’s title. Deciding to invest in tax liens can be profitable, but it does include risk.

Before you invest in tax liens, explore the potential drawbacks.

Receiving repayment of the debt can take a long time–possibly months or even years. The property owner can accumulate more taxes, which the investor might have to buy. Plus, newer tax liens might take priority over the one you incurred. But don’t worry, there are ways to reduce your exposure:

1. Review the credit report thoroughly.

To reduce risk when purchasing a tax lien certificate, thoroughly review the property owner’s credit report before the auction. This report provides crucial information about their financial history and ability to repay the tax debt. It helps you determine if the investment is wise. Tax lien investments can be suitable for experienced real estate investors who understand the local rules.

2. Learn about your options for resolution.

If you are considering purchasing a home with a tax lien, you have several choices when it comes to resolving the situation. You can negotiate with the property owner to pay off the taxes before you close the deal. This option requires buy-in from the owner and can be a win-win situation for both parties. Alternatively, you may choose to purchase the property with the tax lien and assume the responsibility for paying the taxes. In this case, it’s crucial to factor the tax debt into your overall investment strategy and budget accordingly.

3. Above all, ensure that you’re protected legally.

Legal procedures and resolving liens can be complex and time-consuming for homebuyers. It may require working with legal professionals, paying off the debt, and navigating bureaucratic processes to ensure a clean and marketable title.

Consider the condition of the property.

When a property owner fails to pay their property taxes, it can be a sign that other responsibilities towards the home have been neglected as well. For example, if a property owner fails to pay their property taxes over the course of several years, you might reasonably assume that they have not kept current on regular home maintenance. It’s vital to thoroughly inspect the property to assess its condition and potential repair costs before purchase.

Work with a reputable title company.

Before buying a property with a tax lien, seek professional advice and fully understand the implications. To protect your investment and ensure a smooth ownership transfer, a reputable title company is indispensable. They investigate property ownership and liens, like tax liens, to prevent potential issues. In the case of a property with a tax lien, the title company will assist in resolving the lien and securing clear ownership for you.

Don’t forget the title insurance!

Getting title insurance is particularly important when dealing with tax liens. This insurance protects your investment by covering any financial losses from issues with the property’s ownership, including tax liens. With title insurance, you can protect your investment and have peace of mind, knowing that any unexpected problems will be taken care of by the insurance company.

Don’t be scared off by a tax lien on a property – embrace the opportunity! While others may pass due to the lien, you can turn it into a profitable investment when you are armed with the right information and take smart precautions.

Are you considering purchasing a property with a tax lien? The experts at Certified Title Corporation can help. We provide the sound guidance and security you need to move your real estate transactions forward with peace of mind. Get in touch today.

About Certified Title Corporation: Since 1994, attorney-owned Certified Title Corporation has been furnishing residential and commercial real estate stakeholders across the nation with robust title insurance, settlement, and escrow services. Renowned for its industry-leading reliability and exemplary level of service and quality, the Maryland-based company helps clients from all walks of life achieve their asset goals. To learn more, call (888)486-5511 or visit https://www.certifiedtitlecorp.com/.