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Anyone out there know a thing or two about Tax Lien Certificates that the would be willing to share with a newbie?


Tax Lien Certificates are a method that some States use to recoup unpaid property/school taxes. Some States auction the properties off (like my State of PA) and some sell certificates (like NJ I believe).

The difference is that in a sale, you take ownership of the property either subject to existing liens and encumbrances (like our Upset Sale here) or free and clear (like our Judicial Sales where they sell everything that didn't sell at Upset).

The other States sell tax certificates. Generally they provide the buyer with a lien of certain priority on the property (usually first except for IRS liens). It is then the certificate buyers' job to foreclose (I use the word foreclosure even though it is usually used in terms of a mortgage. Here I mean any action to recover a debt against a property) and obtain the property or satisfaction of the debt.

I personally prefer PA's system where the property is purchased at an auction. The prices are higher, but it's more rewarding. It is also much easier to take possession of the property.

With certificates, suppose you purchase $10k worth on a property. Clearly the owner will fight your foreclosure. The owner will try to deal with you, maybe flip-flop in and out of bankruptcy, etc. to delay your repayment. Buyer certificates are a lot like buyer bad mortgages at a discount (very rewarding as well). It takes a committed buyer to get the debt paid.

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