There are two types of government tax foreclosures; one is a bond and the other a deed. An investor may pay the cost of the tax lien on behalf of the owner stopping the foreclosure sale. This means that the property owner owes you the money that stopped the foreclosure sale, interest may be charged on this amount. If the investor is in a position where the owner of the property is unable to repay the money back due to the tax lien, the investor has the right to foreclose on the property and become the owner. With tax foreclosures on deeds, the investor purchases the rights to the deed and therefore the entire property.
It is vitally important for any investor in the real estate market to know as much as they can about the processes related to government tax executions. Basically, what happens when an owner is unable to pay federal or state taxes in their name or property taxes, the government has the right to issue a lien on the property or deed. If these taxes still cannot be met, they foreclose on the property, buy it at auction, and become the new owner of the property.
This state of affairs also occurs if the homeowner is delinquent on the mortgage payments and the bank or lender forecloses on the property. There may still be a government tax lien on the property, but the lender is the primary lien holder, foreclosing the property and paying the taxes, clearing the title. No lender would afford to lose a valuable investment property because a few thousand dollars in outstanding taxes have not been paid.
Government foreclosures allow investors the opportunity to select from many different properties. The current economic climate and financial crisis have created a real estate market in which investors are buying more foreclosed real estate in some cases than any other type of real estate. Buying foreclosures for government taxes presents a valuable investment opportunity for anyone who knows what they are doing. This does not mean that only experienced investors can take advantage of this opportunity, even people new to the real estate market can take advantage of this.
Profitable returns on investment can be earned while the real estate market is at its lowest point. Foreclosed properties generally cost much less than similar properties at market value. Both the government and lenders have a lot of tax foreclosures on their inventories and they have to turn them around and liquefy their assets.
Research and knowledge are vital to any type of investment process and this applies to buying government tax foreclosures. Understand that not all foreclosures are a good investment. The investor has to look for properties that sell for less than they are worth. One way to assess property value is to assess the value of other properties in the neighborhood to see if future growth is possible.