Transcript:
Hey guys, it’s Casey Denman here from Tax Sale Academy.com
Thanks so much for joining me on today’s livestream here on Facebook.
Today, we’re going to go back to the basics again. A few days ago we discussed tax liens and today we’ll be talking about tax deeds.
So, what exactly is a tax deed and why is it such a great investment vehicle?
First off, while many people use the phrase “buying tax deeds” you need to understand that technically a tax deed is actually just a special type of deed, which is the instrument to transfer property from one person to the next. There are a few different kinds of deeds, but what makes a tax deed special is that it is only used when transferring tax defaulted real estate.
So a tax deed is an actual instrument, but a tax deed property or tax foreclosed property is a type of property.
As with every tax foreclosure and tax sale process, the property will have to have reached delinquent status before begins it starts to work it’s way through the tax sale process. So what will happen is the property taxes become delinquent – the owner just doesn’t pay when their supposed to. But instead of a lien being sold by the county like in tax lien states, that lien is essentially held in house for a set period of time – it might not even be technically called a lien in some states, but instead just a delinquent tax bill.
During this delinquency period, the county will charge interest, penalties and fees to the owner of that property. In the event that the property owner is able to pay off those back due taxes, interest and fees, then the county will release that county held lien or remove that property from the delinquent tax list.
If the delinquent tax payer is not able to pay off everything that is due within the redemption period, then the county will start the process towards tax foreclosure. This is an act that will require the county follow state statutes which directs the property through the tax foreclosure process and ultimately the property will be sold at auction.
We’ll touch on the auction momentarily, but it’s important to know that depending on the state the tax foreclosure process can vary substantially. It could be a process where the county actually takes title to the property, then they auction it off as the owner of the property. Or it could also be a process where the property is transferred from the previous owner once the auction is concluded.
So, how does a tax sale auction work? Well, unlike some tax lien sale auctions, it’s actually extremely simple. You go to an auction and they sell the property to whomever is willing to pay the most amount of money. That’s it. Pretty simple, right?
Now, depending on the state, there will be two different types of tax deed sales. A standard tax deed sale and a redeemable tax deed sale.
A standard tax deed sale is where they sell the property and then the delinquent tax payer or former owner loses all ownership interest in it forever. Once it’s sold, the former owner can’t claim any ownership to it whatsoever, with very rare exceptions in certain states.
In a redeemable deed state, the property is sold just like in a standard tax deed state. But with redeemable deeds, there is one final window or redemption period in which the delinquent owner can still come back and make payment of the interest, fees and taxes and cancel or void that deed. So you’d buy the redeemable tax deed property and you’d become the owner of it, subject to the former’s owner right of redemption. This redemption window can be anywhere from 60 days to two years. Now, if the deed is redeemed, you aren’t just out of luck. If it gets redeemed, you’ll receive your investment back plus anywhere from a 12% to 25% penalty charged to the owner.
In the best case scenario, the former owner will not redeem the property and once the redemption period expires you’ll own that property outright without the possibility of any future claims. Worse case is that they do redeem it and you’d earn 12-25% on your money – you’re not going to find that type of return in many places. There also other benefits such as collecting rent during the redemption period, for example.
So, as you can see, tax deeds can be an incredible investment vehicle.
Of course, some states don’t offer tax deeds at all. You can take a look at our state guide by going to taxsaleacademy.com/state-guide; that’s taxsaleacademy.com/state-guide and I’ll add a link below in the comments of this video. You’ll be able to see a color coded map on that page with details on each individual state and how their tax foreclosure systems operate.
I hope you’ve enjoyed today’s livestream on tax deeds. If you enjoy these livestreams, be sure to let us know by subscribing to our channel and clicking that thumbs up button below this video.
And of course if you’re looking to learn more about investing in tax defaulted real estate, be sure to head to TaxSaleAcademy.com. That’s taxsaleacademy.com – and once you get there be sure to pickup a free copy of my new book, The Tax Sale Playbook.
That’s it for today guys. Make it a successful day.
Take care. Bye bye!