The Tax Deed System

Transcript:
BASICS Series

So, there are a few different ways that a state can handle delinquent real estate taxes and today we’ll be talking about the tax deed process.

So a tax deed is simply an instrument or a deed that transfers real estate. But what’s important is the tax deed process.

With a tax deed system, the delinquent tax payer has failed 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!

In a tax deed state, once the property is sold they are no longer able to pay off the taxes and they’ve lost the property for good.

So there it is – the basics of a tax deed system.

I’ll see you next time on our tax sale starter series. Take care.