All About Tax Lien Certificate Redemption Periods

Article Written By: tedthomas

When you invest in tax lien certificates, you are purchasing a document representing the amount of taxes that are past due to the county government. That document permits you to foreclose on the property if the owner never remits those taxes back to you with interest and penalties. So, unlike buying tax deeds, you're really not purchasing real estate altogether; you are earning a gain from the interest you receive on your money, which is much higher than you'll realize for any kind of bank investing such as a CD or savings account.

According to an informal sampling of tax assessor offices throughout the United States, anywhere from 95 to 99 percent of all real estate owners will settle the owed taxes before they cope with foreclosure by the tax lien certificate holder. But there's a deadline for doing this and it's labeled the redemption period.

The redemption period on tax lien certificates will vary by county and state. In a few cases, it is merely days after you purchase the certificate; in the rest the government gives the property owner months or years to pay before they risk losing their property.

Which tax lien certificates you decide to invest in depends to a great extent on what you are expecting to achieve. For instance, if earning a big interest rate - up to 50 percent - with a really conservative business is your aim, then a longer redemption period of years is optimal. The longer the tax lien goes unpaid, the more revenue you make. However, if you are expecting that the certificate never gets reimbursed, you will want to choose a town with a much briefer redemption period in place. This provides you the minimum amount of time where your funds are being used and you can promptly move to get the parcel sold.

There are a few states where the redemption period is thought of as a hybrid. This is the circumstance in Florida, where the shortest redemption period is two years. If the property owner has reimbursed their past due taxes in two years from the day you purchase the tax lien certificate, then you can begin the foreclosure proceeding. However, if you elect to keep collecting the interest rate, you can wait for seven years before foreclosing on the parcel.

Always be sure that you thoroughly figure out the rules that pertain during the redemption period. Several states require that you give the property owner adequate notification in writing, including an announcement in the newspaper. You might have to file papers in court and carry out a comprehensive title search. The more complicated the directions, the more you are encouraged to hire a professional, such as a lawyer, to take care of these details and assure you are in conformity with state law.

This is not wasted cash; you can recover all of your costs plus interest when the tax lien certificate is reimbursed or you move the property. As long as you adhere to the regulations, you will earn a return but if you decline to begin the foreclosure process accordingly, you could forfeit your money.

Just like everything else in tax lien certificate investing, understanding of how the redemption system works in the county you are investing from is vital.

About the Author

Ted Thomas - Get your FREE copy of the Start Up Guide at www.tedthomas.com.

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