Q & A: Why Would Someone Wait to Redeem Their Property?

Here is a question I received from one of my subscribers recently about deed redemption in Texas.

Q: Why would an owner who can’t pay the taxes on a property pay the sales price plus interest on a property to redeem it after a sale?  i.e. If an owner owes $6,000 in taxes and the property goes to a sheriff’s sale with the winning bid being $30,000. Why would they then pay $30,000 + 25% interest ($37,00) to redeem the property if they wouldn’t/couldn’t pay the $6,000 to keep it from going on sale in the first place?

A: Tax Liens redeem 99% of the time in states where property is pricey. In redeemable deed states the rate is a lot lower, but many tax deeds still get redeemed. Remember that the property owner does not have to come up with the entire amount but that they are entitled to use the excess proceeds in order to redeem the deed. So in the example given. If there is $6000 owed in back taxes and the property is auctioned off for $30,000, the property owner than can apply for the excess proceeds of $24,000 and use that towards the redemption of $30,000 plus 25%, or $37,500. So they actually have to come up with the original $6000 that they owed plus 25% of $30,000, for a total redemption amount of $13,500 (in addition to the excess proceeds amount). Still more than double what they originally owed which is why the redemption rate for redeemable deeds is a lot lower than it is for liens.

 

About Joanne

Joanne Musa is known online as the Tax Lien Lady. She helps people who want to invest their money profitably in tax liens and tax deeds and get high returns on their money without the typical risks of real estate investing or the uncertainty of the stock market. Get your free special report on "7 Steps to Building Your Profitable Tax Lien Portfolio" by Clicking Here.
This entry was posted in Answering Questions, redeemable tax deeds and tagged , . Bookmark the permalink.

5 Responses to "Q & A: Why Would Someone Wait to Redeem Their Property?"