Miranda Tsotsoria

Sales Associate

 
Tax liens or tax certificates are a kind of real estate "paper" investment and, at the same time, a real estate foreclosure investment. Basically, in a majority of states, when a property owner doesn't pay his or her real property taxes, investors are given an opportunity to pay those delinquent taxes (plus any associated penalties, accrued interest and costs) on behalf of that owner at an annual sale generally termed simply a "tax sale".

When an investor pays the delinquent real property taxes on behalf of an owner of real estate, the investor gets, as evidence of such payment, a document generally referred to as a "tax certificate", "tax lien certificate", "certificate of purchase" or "certificate of sale".

When an investor pays the delinquent real property taxes on behalf of the property owner and receives a "tax certificate", the investor receives, with the certificate, an assignment of the real property tax lien.

A real estate paper investor might lend money to any owner of real estate, receiving, in return, a promissory note (evidencing the indebtedness) and a mortgage or deed of trust (securing the investment).

Similarly a tax lien/tax certificate investor might pay a real estate owner's delinquent real property taxes, receiving, in return, a tax certificate (evidencing the payment) and an assignment of the real property tax lien (securing the investment).

To induce investors to pay those delinquent taxes, many states offer very high interest returns.

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