It is true that doing your due diligence is the most important step for investing in tax liens or tax deeds. Doing it properly can lead to lots of profit while ignoring this step of tax lien or deed investing could cost you! But did you know that what you do after you purchase a tax lien or tax deed is just as important and what you do before you buy?
There are different steps that you must take to secure your investment depending on what type of vehicle (tax lien, tax deed, or redeemable tax deed) you purchase and which state you invest in.
Here is a list of things that you may need to do after you buy a tax lien or tax deed in some states:
- record the lien or deed with the county clerk
- send state specific noticing to the property owners and any lienholders
- do a title search
- pay subsequent taxes
- clear the title to the property (tax foreclosed properties in most states)
- secure the property (deeds only)
- tax deed application (TDA) – Florida liens
This is just a list of the some of the responsibilities of the tax lien or tax deed buyer in the most popular states for investing. But each state has it’s own requirements that the investor must follow in order to protect their investment. What could happen if the investor fails to do what is required? Well, they could lose their investment!
That’s right, you could lose any money (and time) that you put into purchasing a tax lien or deed if you don’t follow through on the state specific responsibilities for tax lien or tax deed buyers.
Here’s an example…
I had someone offer me a couple of secondary liens in New Jersey that they wanted to sell. In New Jersey, recording of the lien is required within a 3 month period after purchasing it at the tax sale. These liens I was looking into buying were about 2 years old, which means they could be foreclosed on right away.
I did my due diligence on the properties and saw that one of them was a very desirable property in a nice town in South Jersey. So, I asked the seller to send me a copy of the certificate. When I saw the copy of the tax sale certificate, I knew there was a problem, and I would not be able to purchase.
The problem was that the lien had never been recorded. And it was way past the 3 month window that the investor had to record it. Normally this would not be a real big problem, but in this case the property had changed hands since the lien was purchased at the tax sale. And because the lien had not been recorded, it was not paid off when the property was sold.
As a result, the lien is now un-enforceable, hence worthless. The shame it is that the investor could have paid the $50 necessary to record the lien and that would have saved him the $5000 that he paid for the lien. And he would made 18% per year plus a 4% penalty on that $5000 (another $2000!). That’s why it’s so important to know the rules before you invest!
If you need help knowing the rules or figuring out what you have to do in the state you want to invest in, you can schedule a free one time 30 minute Profit Planning session with me. Just fill in the form at https://taxlienlady.com/mentoring-application to get a link to schedule a 30 minute online conference with me via Zoom.
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