Real Estate Investing Blog - DiscountedProperties.com

In today’s economy, many real estate investors have found that there is lucrative money to be made on government tax foreclosure properties.

Government tax foreclosure properties are essentially properties that have a tax lien against them. Tax liens, which take priority over any other types of liens, are usually a result of a homeowner not paying his or her property taxes. When this happens, a lien is levied by the county, and the tax foreclosure properties are sold in an effort to collect the taxes owed.

How Do Investors Make Money on Government Tax Foreclosures?

Frequently, the government will sell these government tax foreclosures to investors, who are essentially looking to buy the tax lien certificate from the county.

In other words, if you purchase liens on tax foreclosure properties, you are essentially paying for the lien and collecting the state-mandated interest rate on the amount for which you originally purchase the lien. Depending on the state, the state mandated tax can be anywhere from 8 to 50 percent on tax foreclosure properties! This means that you can get a tremendous bargain on a real estate property, or you enjoy collecting the taxes and interest rate on government tax foreclosures.

The Benefits of Purchasing Tax Lien Certificates for Tax Foreclosure Properties

The best part of this situation is that tax liens on government tax foreclosures are one of the safest investments because you either (a) collect the money for the lien, plus the state-mandated interest charges or (b) take the property. In other words, government tax foreclosures create a win-win situation. You either collect the money or sell the property – either way, you make out profitably on the deal.
Because counties rely on property taxes for the majority of their revenue, they are happy to sell the liens to investors and get out from underneath the properties, of which they have no interest, other than to collect the owed taxes.

Counties often sell the tax liens from tax foreclosure properties because it may take months for the property owner to finally pay on the lien – which often never happens. On the other hand, if an investor purchases the liens for their government tax foreclosures, then they essentially collect their taxes and pass the liens onto someone else.

The liens on government tax foreclosures give homeowners a predetermined amount of time to pay the taxes. During that time, interest accrues. If the taxes are not paid during the predetermined amount of time, then the homeowners lose their properties. The time during which the county has given the homeowners of the tax foreclosure properties to pay their taxes is the time that you, the investor, can make money from the accrued interest.

Because of the downturn in the economy, government tax foreclosures have made a resurgence, which therefore means that many investors can stand to make a great return.

There are many ways to stop foreclosure, and by learning about the strategies you can implement to keep your home, you can avoid becoming yet another victim of a home foreclosure process.

Throughout the foreclosure process, it is important to remember that your lender is not your enemy! In fact, the vast majority of lenders want to stop foreclosure as much as you do; the costs for foreclosure from a bank’s perspective are very high, which does not bode well for strengthening their bottom line.  Keep the lines of communication open and explore all of your possibilities with your lender to stop foreclosure.

1. Educate yourself on the foreclosure laws in your state. Remember: foreclosure process laws range widely from state to state, and it is important to understand the laws so that you can best protect your home from the foreclosure process.  Some states have expedited foreclosure processes that may leave you homeless in 30 days, while others outline a foreclosure process that could take up to one year to complete.

2. Contact your lender as soon as you experience trouble. Chances are that you and your lender can work out an agreement to stop foreclosure on your home, especially with the stimulus packages that have been passed by Obama’s administration.  However, if you wait until you are in over your head, then your options to stop foreclosure will likely be very limited.

3. Never, ever miss a mortgage payment! Missing a mortgage payment starts a dangerous snowball effect that is difficult – if not impossible – from which to recover.  Do everything in your power to make your mortgage payments while you work with your lender so that your credit remains intact and your relationship with your lender remains strong.  Should you expect that you may miss an upcoming mortgage payment, contact your lender as soon as possible to discuss the situation.  It is always better to keep your lender informed than in the dark, especially if you want to stop foreclosure in the future.

4. Do not deny that you may be in trouble. Facing your problems and dealing with them before they become uncontrollable is arguably the most important thing you can do to stop foreclosure. Talking with your lender and your spouse and preparing for the future is the smartest way to remain in charge of the foreclosure process and in control of your financial situation.

5. File for Chapter 13 bankruptcy to stop the foreclosure process in its tracks. If you desperately need to stop foreclosure and cannot negotiate an option with your lender, then consider filing for Chapter 13.  Make sure you learn about the ramifications of filing for bankruptcy and how it will impact your credit for years to come.  It is also important to file your Chapter 13 filings on time and to make the payments on time.

With the spike in home foreclosures seen all across the country, many lenders are reaching out to homeowners and doing what they can to stop foreclosure. It is important to use this to your advantage and to set up repayment or loan restructuring plans with your lender before your mortgage debt gets out of hand. Remember: the lender is not always the enemy in this situation! It pays to keep the lines of communication open so that you can stop the foreclosure process and keep your home.

There are dozens of ways for an investor to make money in real estate, but one of the most commonly overlooked ways is the property tax foreclosure market. We all know that taxes have to be paid, but life sometimes gets in the way of the best laid plans.

Missing a tax deadline is sometimes the result of a lack of funds, but in many other cases people forget they own property or are unaware that a deceased family member has left property to them. When this happens, notices are sent, and if they’re not taken care of by the homeowner within a reasonable period of time, property tax foreclosure can be the final solution for a local governmental body that just wants their money.

The key to capitalizing on the opportunities presented by property tax foreclosure is to learn the process in your state. Every state has their own method of collecting on unpaid taxes. Some will auction off properties, while others will sell tax deed certificates to investors for a fixed rate of return. The investor can then earn interest on the certificate from the homeowner. Then, if the taxes aren’t paid within a defined period of time (based on the laws of the state), the investor will be able to gain control of the property through property tax foreclosure.

There are lots of ways to turn a profit in real estate today, and property tax foreclosure is one of the best. You can make money in more than one way – and even though the homeowner usually pays the taxes owed – you won’t walk away empty handed. So look into the possibilities presented by property tax foreclosure.

You’ll be glad you did.