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| Tax Foreclosures
- Government Foreclosures |
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This article is only intended as an introduction to tax foreclosures
and the tax foreclosure process. A tax foreclosure is a legal
procedure used by government agencies to enforce a lien against a
property for non-payment of income taxes or property taxes.
Government agencies hold tax foreclosures one to four times a year.
The IRS will sometimes place a tax lien on a home or other real
property and sell it at an auction to recover the unpaid income
taxes. When a tax lien is put on a property, it takes priority over
all other liens on the property. State and local governments raise
revenue via property taxes. When property taxes become delinquent,
an involuntary tax lien is placed on the property by the taxing
authorities to recover the amount owed. If the delinquent taxes are
not paid within a predetermined time frame, the property is then
sold at public auction. A minimum opening bid is required that
covers the delinquent property tax amount, legal costs, interest,
penalties, and miscellaneous fees.
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The highest bidder at the auction receives a tax sale certificate
when he pays the bid amount. The delinquent property owner can
regain title to the property if they pay back the lien amount plus
interest and miscellaneous expenses before a redemption period set
by law expires. The redemption period can vary from several months
to several years in some states. If the delinquent property owner
exercises his right to redemption, they must pay an interest charge
that can be fairly large on the amount paid at foreclosure by the
purchaser. Before you place a bid at a tax foreclosure, be
sure you know how long the redemption period is. When the
redemption period expires, the purchaser can petition the court to
foreclose and remove the delinquent parties right of redemption.
When the tax foreclosure process is complete, the court issues a
deed that conveys the property title to the purchaser. If the
bid amount was greater than the amount owed to the government, the
excess amount will go to the next property lien holder or to the
previous owner if there is no lien holder. |
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All liens on the foreclosed property are generally removed upon
completion of the tax foreclosure process. However, if a previous
lien holder attempts to enforce their lien on a foreclosed property,
it is the new owners responsibility to defend against their claim.
If there is a mortgage lien on a property, lenders will usually pay
the taxes and add the amount to the property owner's mortgage to
avoid foreclosure and protect their investment. Many properties
don't make it to the foreclosure process for this reason. |
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All liens on the foreclosed property are generally removed upon
completion of the tax foreclosure process. However, if a previous
lien holder attempts to enforce their lien on a foreclosed property,
it is the new owners responsibility to defend against their claim.
If there is a mortgage lien on a property, lenders will usually pay
the taxes and add the amount to the property owner's mortgage to
avoid foreclosure and protect their investment. Many properties
don't make it to the foreclosure process for this reason. |
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If you intend to bid on a property at an
auction, learn everything you can about the property. Are
there any other liens on the property? How is the property
zoned? Can you build on the property, etc.? You should
be thoroughly aware of the risks and potential headaches involved
with tax foreclosures and clearly understand what the delinquent
parties legal rights are, specifically their redemption rights.
Be sure to rigorously study the tax foreclosure process before
bidding. In rare cases, you can gain title to a property for
pennies on the dollar.
©
Copyright 2000 -
2012 Advantage
Software LLC |
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