What am I missing?
Hi,
I am new to the board. I read thru the basics of buying tax liens. But what I don't understand is how can you get a property free and clear by just buying a lien certificate?
Say I bid in an auction and buy tax liens for $5000 (taxes owed on this property) and say that the owner never redeems it.
This will lead to the state foreclosing or you as the lien holder foreclosing the property after the wait time(what ever # of years it is) right?
What about the mortgage on this property and the lender who has the first mortgage?
How can I get the property free and clear after the waiting period? What happens to all the loans(primary/secondary etc) that are attached to the property?
When I get the property do I assume it all? What am I losing here? How will the property be awarded free and clear?
Will someone guide me? 
thanks
State lawmakers created municipal tax lien laws to safeguard individual states from funding requests made by the municipalities to cover shortfalls in their budgets due to unpaid real estate taxes. Statutes were created to offer the liens to private investors to bridge the gap in the municipality funding. To make it worthwhile to the private investor, statutes were set with high yields, and the ability to foreclose on the property if the arrears went unpaid. State jurisdiction set priority over other liens on the property, even first mortgages, except federal and state liens. This is the broad explanation; you need to check with each state's individual statute.
If you were a bank or mortgage company which holds a first of $100,000 on a property with taxes in arrears of $5000, would you stand on the side, or pay off the tax lien with interest and penalties to keep your control of first position? You would pay it off. That is why most properties don't go to foreclosure.
Hope this answers your questions.
Thanks a lot Thenecktiekid.
Since you seem to know what you are talking could you point me in the right direction as to any good books/websites/course material where I can study on this more. I am just a newbie wanting to get more info. You can't find info more than couple of pages in any REI books on this topic.
I was planning on joining my local REI club but just looking at their message boards it doesn't seem as active as this one is.
thanks
Saw your recommendation for CD-rom under another thread. Thanks.
Goal69,
You have probably done a search for tax liens on the net and seen there are a lot of sites giving basic info on the investment. Most are selling the same old material. For books check out The 16% solution, Cash In on Cash Flows (deals with all types of cash investments) and the CD by Seventh Financial.
Investing in Tax Liens is a business, and should be treated as such. Getting to own a property for pennies on the dollar is icing on the cake. TLC investing is more labor intensive than placing a trade online, but the probabilities are more in your favor that you will receive consistent returns.
The playing field has become very competitive, so you need to know what yield you have in mind and how to have your money work best for you. “What is the least I will accept on a lien?” Also, your time in research is money as well. I went to an auction today, just to give you an example, there were 60+ liens listed in the paper. At the auction, 33 were available, and 14 of those had prior lien holders. So 19 were available to purchase. You need to optimize your due diligence. I purchased and walked away from some. NJ has an 18% rate and penalties of 2 to 6%. All were bid down, the best were only to 5%, and some paid a premium 2 times the initial lien. To a new investor they would say that’s crazy! Why pay $120,000 premium for a $54,000 lien? So you have to know how the state statutes work and how best to have your money work for you.
I am collaborating on a website that takes the farce out of those infomercial websites and gets to the meat & potatoes of Tax lien investing. I’ll keep you up to date. Hope this helps and wish you luck in your new business.
Necktie
Thank you necktie very informative! How would one go about finding these auxtions before they happen instead of after?
John
I'd encourage you to check out your local RE groups. Just because they don't have a great website doesn't mean that they don't have great meetings. They are a fantastic place to network, and talking with people who know your market in person is much more valuable than a forum.
Thank you all for your replies.
I am not investing right now..but just studying to find the ins and outs of this business.
I have decided to join the local REI club for $100/year just because they say they have a RE library. The local libraries don't have a thing on REI. The books listed are either missing or long over due.
I guess it is an investment worth it to gain knowledge.
By the way..I live in Tulsa, OK.
Anyone from there on this board?