Foreclosure sales arising out of unpaid tax debts are a win-win investment and a sure thing for buyers, even if they are new real estate investors. The buyer either gets the property for a rock bottom price far below the market value, or earns a huge amount in interest if and when the debt is paid off by the original owner. Either way, there's no real downside to a tax foreclosure sale.
The process kicks off when a homeowner is unable to pay property taxes. The taxing authority to whom the debt is owed is typically the county government or another municipality such as the City of Baltimore in Maryland. It can also be a school district or other taxing entities which have been authorized by voters to impose taxes on property within the municipality.
When a taxpayer fails to respond to repeated notices to pay the debt, legal action can be taken to seize the home. What usually happens is that once the property is foreclosed and seized, the taxing entity auctions it off in order to recover the amount of unpaid debt. However, it's not necessary for the taxman to do all this on their own.
It's far easier for the local government to get out of the matter simply by auctioning the lien or the deed. This would mean the homeowner would then need to deal with the new buyer. If the buyer has acquired the lien, then all the homeowner needs to do is pay off the original debt and an additional sum for interest and legal costs.
If the deed is acquired in the auction, the buyer can quickly foreclose on the home and take possession. This gives them full ownership at a small fraction of the home's value. This is because the unpaid taxes are usually very small as compared to the market value of the home.
It is without any doubt an attractive proposition, but the key to a successful sale here is to follow the legal steps exactly as required by law. Buyers cannot just knock on the door and expect the owners to hand them the keys with a smile. While the precise steps may vary by state, it is generally something that can be done in three simple steps.
A letter must first be sent by registered mail or certified post to all the owners of record. Not to mention other parties with an interest in the matter, including mortgage and lien holders. The next step is to place a public notice in a newspaper of record, and then post a notice on the property in a prominent exterior spot such as the door or a sign post.
The homeowner is able to stop the foreclosure at any time before it actually happens simply by paying off the amount owed. The payment must cover the original unpaid taxes, plus the interest on it and all the other legal and court costs borne by the other party. Let's just say that one way or the other, the investor is in for a big profit either through these add-on charges or ownership of the house on the cheap.
The process kicks off when a homeowner is unable to pay property taxes. The taxing authority to whom the debt is owed is typically the county government or another municipality such as the City of Baltimore in Maryland. It can also be a school district or other taxing entities which have been authorized by voters to impose taxes on property within the municipality.
When a taxpayer fails to respond to repeated notices to pay the debt, legal action can be taken to seize the home. What usually happens is that once the property is foreclosed and seized, the taxing entity auctions it off in order to recover the amount of unpaid debt. However, it's not necessary for the taxman to do all this on their own.
It's far easier for the local government to get out of the matter simply by auctioning the lien or the deed. This would mean the homeowner would then need to deal with the new buyer. If the buyer has acquired the lien, then all the homeowner needs to do is pay off the original debt and an additional sum for interest and legal costs.
If the deed is acquired in the auction, the buyer can quickly foreclose on the home and take possession. This gives them full ownership at a small fraction of the home's value. This is because the unpaid taxes are usually very small as compared to the market value of the home.
It is without any doubt an attractive proposition, but the key to a successful sale here is to follow the legal steps exactly as required by law. Buyers cannot just knock on the door and expect the owners to hand them the keys with a smile. While the precise steps may vary by state, it is generally something that can be done in three simple steps.
A letter must first be sent by registered mail or certified post to all the owners of record. Not to mention other parties with an interest in the matter, including mortgage and lien holders. The next step is to place a public notice in a newspaper of record, and then post a notice on the property in a prominent exterior spot such as the door or a sign post.
The homeowner is able to stop the foreclosure at any time before it actually happens simply by paying off the amount owed. The payment must cover the original unpaid taxes, plus the interest on it and all the other legal and court costs borne by the other party. Let's just say that one way or the other, the investor is in for a big profit either through these add-on charges or ownership of the house on the cheap.
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