Tax Lien Investing: What Happens After the Tax Sale?

OK, so you’ve been to your first tax sale and purchased a few tax lien certificates, now what do you do? That depends on where you purchased your tax liens. Every state has different laws concerning tax sales and what you need to do once you purchase a tax lien certificate in order to protect your investment. Depending on the state and the county that you invest in, there are three things that need to happen after you purchase a tax lien certificate:

1. You receive the tax lien certificate(s) from the county. This may take a few days or a couple of weeks after the tax sale. Some counties do not issue you a tax lien certificate, but instead will give you a receipt listing all of the tax liens that you purchased.

2. The tax lien certificate must be recorded with the county clerk. For the counties that hold on to the certificates and issue you a receipt, this will be done for you and you will pay a fee per certificate for this service. In other counties you must record the tax lien certificate yourself. You will need to send in the original certificate to the county clerk with the appropriate recording fee. Make sure to make copies of your certificates and send them to county clerk via certified mail with a return receipt for proof of mailing. That way if anything happens to your certificate, it will be easier to replace.

3. You must pay the subsequent taxes on the property if the owner does not pay them and you want to keep control of the property. Each tax lien state handles subsequent taxes differently. In Florida, you do not get pay the subsequent taxes and the property will be sold in the tax sale each year. You can try to purchase the tax lien on that property in next year’s tax sale, but there is no way that you have of controlling the lien. It really doesn’t matter in Florida anyway, since you do not get to foreclose on the property if the tax lien doesn’t redeem during the redemption period. Instead, you petition the court for the lien to go to a deed sale so that you will be paid.

Most states do allow you to pay the subsequent taxes, and it is in your best interest to do so because it gets added to your lien and you receive interest on your subs. Some states will give you the maximum interest rate on the subsequent taxes paid. Others will only give you the interest that was bid at the sale, but still it’s a way to add to your lien, and control the property so that it does not go into next year’s tax sale.

Some counties in Arizona actually force you to pay the subsequent taxes if you want to keep your lien. They require the successful bidder to purchase any prior tax liens on the property in addition to the lien they win. This way they keep only one tax lien certificate on a property at any time. If you don’t pay the subsequent taxes on the property, it will be sold in next year’s tax sale and your lien will be redeemed. So if you want to keep your lien in these counties, you must pay the subsequent taxes.