Why And What are Tax Liens?

Why and what are tax liens? Tax liens statutory liens that are placed against a property. They are filed because the property owner failed to pay his taxes on the property.  Since property taxes become the primary source of revenue for the state and county governments it is necessary for them to place tax liens against these unpaid taxes.  Without these taxes paid we would have not have schools, roads, police, fire men, county officials, and many many more taxing entity’s.

This is the way that the county gains their taxes by selling tax liens to investors and being able to get back all of the lost money they were counting on to utilize during the year for their budget.  When you ask why and what are tax liens, remember that this is one way the public service people get paid and the county gets to stay in business while providing for us, the public.   The investor will get his initial investment back and he will also gain the interest that is paid back by the property owner when the taxes get paid.  After the redemption period has expired if the owner has not paid his taxes then he will forego the property to the tax lien holder.   What a sweet deal for the investor.  Nobody likes to see someone lose his or her home though.  There are ways to keep them in their home and you can still make money but we can discuss that on another blog.

Now let’s get to the why of why and what are tax liens?  Why do people lose their properties to unpaid taxes?  Well, there are different reasons that come to mind and most of the common ones are divorce, death, and even the lack of knowledge because the taxes were suppose to be paid by escrow and the mortgage company had no awareness of it.  This can happen and does happen and in today’s world of struggling economy one more reason can be added.  I just didn’t have the money at the time I needed it to pay the taxes.  So, you can see that by purchasing a tax lien you can become a savvy investor and give someone a chance to hang onto his or her property a little longer.  Hopefully it will be a long enough time that the owner will be able to get the money together to pay it off and you will reap the harvest and make a great interest rate!

Why and what are tax liens?  This is just a very small capsule that explains the definition and reasons for tax liens.  There are 3,141 counties in the United States and all of them have property taxes that need to be paid.

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