It's high season for tax sales in Florida. Over 200,000 tax liens have recently been posted for this state at RealtyStore.com.
A tax lien develops as a result of a property owner's failure to pay annual property taxes. Some states may proceed with a tax deed sale, while others will just issue a tax lien. In states where tax liens are used, if a homeowner neglects to pay taxes for an extended time, the county or municipality can then issue a tax lien on that home. This document is a demand that the owner pay the outstanding taxes plus any penalties accrued, and occasionally even an additional high interest on the debt which is meant as a deterrent. Once the homeowner pays this debt, the municipality or county removes the lien.
However, if after a six-month period the tax lien remains unpaid, the county or municipality may have a public auction to collect the outstanding debt. In effect, the person buying the lien is paying off the homeowner's delinquent taxes.
Once a person pays the tax debt off at a tax lien auction, the debt, together with its high interest rate, is now owed to him/her. If the lienor (the homeowner who fell behind on taxes) does not replay the balance and interest, the lienee (the person who's bought the lien at auction) is entitled to foreclose on the residence. This usually happens after a redemption period of anywhere between 6 months to 2 years.
The great thing about investing in tax liens is that this investment is highly secured by a real estate asset. All other claims to the property - including mortages - fall subordinate to the tax lien, and the homeowner cannot sell the property unless and until he/she addresses the lien balance.
Most often the homeowner will repay the debt within two years, rather than risk losing his/her property to foreclosure. In such a case, the lienee (investor) has received a pretty high rate of return on a fairly small investment.
In the event that the homeowner does NOT repay the tax debt, the lien holder can proceed with a foreclosure, which puts them in a position where they obtain title to the home for an amount that is usually between 1% and 20% of the property value.
Tax liens in Florida
A search for tax liens in Florida shows most counties with at least a few listings. However, some counties have massive amounts of tax liens and tax auctions. Hillsborough County is one such example, with 32,646 auctions/tax sales listed. In the city of Tampa alone we find 19,087 auctions and tax sales. Broward County is another example, with 29,915 auctions & tax sales listed - most of these around Plantation, FL. Bay County is also showing massive numbers of tax sales and auctions - 8,222 results for that county.
If you're considering investing in real estate, and would like to do so with a relatively small investment, consider investing in tax liens in the state of Florida.