Foreclosing on Your Tax Lien

By Joanne Musa

Foreclosure procedures for tax liens are different in every state. Some states make it easy for you and you only need to petition the county court, or go through an application process to get the deed to the property. In other states you will have to go through a foreclosure process with an attorney and this may take a lot of time and money. If the property has to go through a foreclosure sale, you may not receive the property, as it will go to the highest bidder at the foreclosure sale, but you will get paid on your lien.

One question that I get a lot about investing in tax liens is what percentage of tax lien properties can you actually foreclose on. I can only answer this question for the state that I invest in which is New Jersey. I have gotten e-mails from my subscribers who have heard that in New Jersey only 10% of tax liens actually foreclose, but the reality is that it’s more like 1%. And this is only the percentage of tax liens that you will be able to start foreclosure on. Most properties that you start the process on will redeem at some point during the foreclosure process. What I have experienced and heard from other investors in New Jersey is that it is a very small percentage of tax lien properties that are actually foreclosed on, in some area of New Jersey it is as low as .01%, since 99% of the 1% of properties that go to foreclosure will redeem at some point in the foreclosure process. There are some areas of the state that have a higher percentage rate of tax lien properties that foreclose, and these are the in the larger cities that have a larger percentage of distressed low value properties. If you are going to tax sales in the hopes of obtaining properties for back taxes, you may want to invest in deeds rather than tax lien certificates. What has happen in the North East and many other area of the country is that property has become so valuable that it is not likely that a homeowner will not be able to pay off a tax lien on their property.

Another thing to consider about investing in tax liens in hopes that you will be able to foreclose on the property is that in order to foreclose, you will need to pay all of the subsequent taxes on the property. A tax lien is not an investment that you buy once and forget about like a bond or a CD. It is something that you will have to continually invest in if you want to ensure the profitability of your lien. You must continue to pay the taxes during the redemption period to keep the taxes up to date on the property, so that when it comes time for you to foreclose on the property the taxes will be current. And when the redemption period is over there are more expenses that you will need to pay, like title search fees and lawyer fees.

The first thing that we do when it comes time to foreclose on a tax lien is a title search. Once you find out if there are any other liens on the property, you can send out a pre-foreclosure letter informing the owner and all other lien holders that you intend to foreclose on the property if you are not paid the amount that is due to you. Many liens will redeem after this step, saving you the time and money of hiring an attorney to start foreclosure proceedings for you. You can furnish any title searches that you have ordered to your attorney and your attorney will order updates when they are necessary. They will also send out a legal 30day foreclosure letter that will inform the property owner and all lien holders that the property will be foreclosed if a reply is not received within 30. Thirty days after this letter of notification is sent your attorney can start formal foreclosure procedures.

Joanne Musa works with investors who want to reap the rewards of tax lien and tax deed investing. She is the author of the Tax Lien Lady’s E-books, Tax Lien Investing Secrets and Tax Lien Lady’s State Guide to Tax Lien and Tax Deed Investing. For more about tax lien investing e-mail MoreTips@taxlienconsulting.com.
This article is for informational purposes only and my not be applicable in every state, since each state has different laws regarding tax lien and foreclosure. This article is not intended as legal advice. You are advised to seek out a qualified attorney for legal advise in this matter.