What Are Tax Liens?
Counties depend on property taxes for the services that they provide to their communities. When property owners are delinquent in paying, the counties still need the cash to pay for their expenses. Many counties throughout the United States will have auctions at which bidders pay the delinquent taxes and become entitled to collect the taxpayer's eventual payment along with penalties and/or interest. It is a positive solution because the county gets their needed money, the property owner is allowed additional time to pay, and the auction purchaser gets a safe investment earning a good return. The debt attaches to the property in the form of a "tax lien". The auction purchaser assumes the rights of the county which typically means that their tax lien takes priority over all others. This "first position" lien incentivizes both the owner and mortgage company to protect its position by paying back (redeem) the lien.
Over $8 billion of tax liens are sold at auctions each year and they can provide an impressive reliable return on investment. In addition, the recent real-estate / mortgage issues have added a boost to the quantity and quality of the liens available and enhanced the return rates.
