Since the Florida tax lien auctions are coming up in May I thought that everyone could benefit from the answer to this question that I got about Florida tax lien investing…

Question:  Florida tax liens from 2011 expire in May – how does one prompt property owners to pay up?  How do you file Tax Deeds and what are the costs/risk and benefits.

Answer & Clarification: Before I answer this question, I just want to give a little clarification about what it means when a lien expires and what happens in Florida if your tax lien doesn’t redeem.

Lien Expiration

Tax liens do expire, this is something that some experts do not make known. In Florida the redemption period is 2 years, but if you let your tax lien go and don’t start a tax deed application after the redemption period is over, you only have 7 years from the date of the tax sale until the lien expires. Once the tax lien expires, you will not be able to do a TDA (tax deed application), and there is no reason for the property owner (or anyone else) to redeem the lien. Your lien will expire worthless, any rights that you had are no longer in effect.

What happens in Florida when a lien isn’t redeemed

In Florida, if your tax lien doesn’t redeem, you don’t get to foreclose on the property like you do in other tax lien states. Instead you do a tax deed application (TDA). Each county has a different application fee for the TDA and when you apply, you also have to redeem any outstanding liens, whether they are prior or subsequent to yours. This is a good thing, because your entire investment will now earn 18% from this point on, regardless of what you bid at the tax sale.

Answer to the question:

You would have to start a deed application in order to get paid and time is running out. Keep in mind that in order to do a deed application, you would have to redeem any outstanding liens – prior and subsequent to yours. Hopefully there are no prior liens, but that still means you would have to pay 7 more years of taxes and the application fee (which varies with the county – usually at least $200 and could be more). The good news is that all this money will now earn 18% interest until the property is sold at the deed sale or it redeems. The tax deed application is usually an easy process that can even be initiated online in some counties.

The Risks

The risk is that now the money that you have to pay to do the TDA may be approaching the value of the property, that’s why it’s best to do a TDA as soon as the redemption period is over and not let it ride for a long time. You have to weight what you will have to invest in doing the TDA vs. what the property is worth. If the property is worth at least double your investment then you could still be in good shape if you don’t have to put a lot more into it in order to sell it. You also need to actually look at the property and assess just how much work it would need to make it ready to sell, just in case no one bids on it at the deed sale and you do get the property, you don’t want to be stuck with something that you can’t sell unless you put a lot of money into it.

Florida Tax Sales

The Florida tax lien sales are held once a year in May and many of them are online. For more education and training on how to buy Florida tax liens online, as well as which other states have online tax sales and how you can register and bid at those auctions, check out my Buying Tax Liens Online training.