Thursday, June 25, 2009

Tax Lien Foreclosure

I’ve invested in tax liens and deeds throughout the country for over two decades. It’s almost second nature for me now. In all that time one of my biggest gripes is the terminology that’s used in different locals. I guess it’s to be expected. The title of this post is a perfect example of one of the most confusing terms used I can imagine. Google the term tax lien foreclosure and you will get 714,000 hits.

But when I hear the term I’m not quite sure what it means. My first thought is the process in a tax lien state where the redemption period has run and I am now in a position to perfect my ownership in a property secured by a tax lien. In Louisiana that action would either be a suit to quiet title or more commonly referred to as a suit to confirm title. The suit is a fairly simple filing that can become quite complicated if the previous owner appears and defends or actually institutes suit to annul the tax sale. Most tax lien certificate defenses revolve around the issue of notice or lack thereof to the previous owner or other interested party prior to the auction, as well as possession issues. The other avenue to perfect title is an action in monition. Which is basically clearing title by advertisement, a suit is brought and an advertisement is placed in the appropriate legal journal to notify previous owners that they must bring an action to annul or the title will be perfected. I can’t however say I ever heard either process referred to as a tax lien foreclosure.

You may possibly hear the term as it relates to the process by which the Internal Revenue Service enforces collection of taxes by auctioning off property that is seized with a tax lien for failure to pay taxes due. When dealing with immovable property there is almost always a redemption period and if you are lucky enough the tax debtor doesn’t redeem and the service issues you a deed. However, my experiences with these sales haven’t turned out that simple. Be prepared for additional litigation. The good part is you can usually just piggy back on the US attorney that will be defending the IRS’s position. But remember they represent the government. You are not their client.

I know I’ve been real general in the above discussion. I’ve done it purposely. Over all the many years I’ve invested in tax lien certificates there have been a great many changes in the law, statutes and interpretations. What may have been good twenty years ago is no longer valid and what was impossible just a couple of year ago may not only be possible, it’s commonplace. The whole idea behind this blog is to get you to see the money making opportunities of tax lien certificates so you can develop strategies that work. I will not and will never attempt to tell you what the law is. You need to seek legal advice from a legal professional on questions and matters pertaining to legal issues. But I will discuss ideas that are legal in nature as all tax sales are governed by laws and statutes of the jurisdiction in which the property is located.

I guess it would be a good time to get back to the subject of this post. What is the meaning of tax lien foreclosure? I can probably sum it up like this; I’ve been investing over twenty years and the term tax lien foreclosure has been used five times in this post. Than four more times than I’ve ever heard it uttered in the real world.


  1. Interesting post,

    One of the best ways to invest in real estate, even in this economy, is by purchasing tax foreclosure properties. Tax foreclosure properties are the result of unpaid tax debt. First a tax lien is placed on a property when the owner fails to pay the taxes that are due. After a certain amount of time (which can vary) the government will eventually sell the property in order to get payment for the back taxes. In many cases the property tax bill is much less than the actual property's worth. Sometimes tax lien properties sell for as little as 5% to 30% of their market value.

  2. I love tax lien foreclosures. In the past decade I've acquired 15 properties that I paid pennies on the dollar for all thanks to the tax lien foreclosure process.

  3. I live in Louisiana and am interested in beginning to invest in tax sales. My biggest point of hesitation is that I am still unclear on the process by which the lien holder (the investor) actually takes title of the property.

    My limited experience with Louisiana property laws tells me that if the taxes aren't redeemed the sheriff seizes the property and sells it at an open auction.

    The research that I've done, as well as this blog, leads me to believe that somehow the lien holder is automatically entitled to the property without actually buying it at auction.

    My question is this:

    Let's say I own a lien that has just passed the redemption period. What is the step-by-step process that begins with the end of the redemption period and ends with me being the owner of the property.

    Thanks in advance,
    Newbie Investor

  4. Anonymous, the step by step process beginning with the end of the redemptive process is this:

    1) Call your lawyer.
    2) See #1.