Tax Deed vs. Tax Lien

07 Oct Tax Deed vs. Tax Lien

Different states either sell tax liens or tax deeds to tax delinquent investors. Tax Deed states sell the actual property to you when an owner is delinquent for a number of years. Some states will sell you the Tax deed, however the original owner still has the right to redeem their property from you. Some counties allow the original owner to redeem their property the next morning after the auction and others will allow longer redemption periods up to a few years.

There are 2 ways the state get to sell properties:
1. The state forecloses, then owns the property and auctions it off as the seller; and
2. The state obtains the power to sell from the court but doesn’t own the property;

Interest payments do not go either to investor or state because when a state owns a property, redemption is lost. Thereby, interest payments accrued from the effort of redeeming the property like in Texas and Tennessee are lost too. Redemption is never lost however until property is sold in the second process. If there is no bidder, original owner continues to own it until 5pm of the next day of the auction.

In California, properties become delinquents after July 1, if not paid. There is no auction after 5 years, where power to sell can only be obtained and scheduled for auction sale. In California, county only has the right to sell a July 1, 2007-delinquent property on 2012 and actually sells the property on 2013 and half.

What happens then between 2007 and 2013? Purchaser gains the right over the land.

Immediate property rights is the advantage of tax deed. If a property is delinquent at 2003, property will be auctioned on 2008. When a bidder wins the property, he/she can immediately occupy the property and evict delinquents. The drawback though is it is a cash business. Though checks are accepted, purchase price is paid within 24 hours or on the time of auction. Failure to pay immediately bans the bidder from future county auctions forever.