Transcript:
Welcome to our tax sale start series where we’ll take one specific topic and explain it to you in less than two minutes!
Today:
What is a redeemable tax deed?
So, there are a few different ways that a state can handle delinquent real estate taxes and today we’ll be talking about the redeemable tax deed process, not to be confused with the similar tax deed system. The word redeemable is very important here.
A tax deed is simply an instrument or a deed that transfers real estate. What’s important is the tax deed process and how the word redeemable is applied.
The process starts off just like that of the standard tax deed process which we’ve discussed in another video. It all begins with the delinquent tax payer failing to pay their taxes on time – that’s how this process and every other tax sale process will start. With the tax deed process, the county then flags that property as being late and starts charging them late fees. They have a period during which they can come back and pay the delinquent taxes, late fees and interest to the county and then it’s current again. But, after a set period of time, which could be 2, 3, 4 years, the county will foreclose on the property through the tax foreclosure laws. Once they foreclose on the property, they will then sell it to an investor at a tax sale with the opening bid typically starting at the amount of back due taxes, interest and fees owed to the county which is often a fraction of the property’s fair market value. That’s where you, the investor, can come in a capitalize if you know what you’re doing!
Now . . . this is the part that differs from a standard, non redeemable tax deed. With a redeemable deed, the delinquent tax payer is offered one last final redemption period. So they had the period before the tax sale to pay back the county, then the county sells the property and now they have one last right ot redeem the property. This redemption period is usually much shorter than say a tax lien, could be as short as 120 days or 6 months. If they redeem during this period you’ll get your money back plus a hefty penalty fee, which can b upwards of 50%. If they don’t redeem, which is the case most of the time, those redemption rights are lost and the investor becomes the owner of the property.
After the redemption period has expired then you become the sole owner of the property, with most liens extinguished.
So there it is – the basics of a redeemable tax deed system.
I’ll see you next time on our tax sale starter series. Take care.