Tax Lien Homes - How to Buy Them Before Your Competition

In the current economic slowdown, more and more properties are being lost to mortgage foreclosure and tax foreclosure. It's sad for the people losing their homes, but it's a fact of life that won't change any time soon. If you're interested in investing in property, now is the definition of "striking while the iron is hot." One of the best ways to invest is by purchasing tax lien homes... but probably not the way you'd expect.

Most people who are interested in owning tax lien homes follow the traditional route: they attend the tax lien sale. Properties are sold to the highest bidder, and payment is expected up front, right then and there. Whoever is the winning bidder is awarded a tax lien on their chosen property. Unfortunately for them, rarely is anyone able to get a good deal on tax lien homes this way.

Counties use the bidding process to get the highest possible price on these liens. Any property worth owning will be bid up to near retail value by agents for large tax lien firms and other average bidders. These firms have tons of money, and thus, can afford to make a smaller return on their investment than you. In a bidding war with one of their agents, you'll almost certainly be outbid.

Worse than that, if you are successful, there is a long waiting period for the former owner to redeem his property-- that is, pay off the taxes and penalties and bail his property out-- before the new owner can foreclose on the lien and take possession. This waiting period is up to 5 years in some states. (The royal pain that is foreclosing on a tax lien is another story altogether!)

Worst of all, 95% of the time, the owners do pay off their taxes. So don't get your heart set on ever actually owning one of these tax lien homes! It's great if you're simply looking for a good interest rate on your money, however, in that case you'll have to deal with the risk that you'll end up with a property you didn't want. Since you can't inspect the properties beforehand, that should be enough to scare off just about any smart investor.

There's a much easier way to buy tax lien homes that allows you all sorts of benefits bidding at the tax sale doesn't: simply contact the tax delinquent owners yourself before the tax sale or redemption deadline, and offer to buy the property from them yourself! Unlike at tax sale, you'll be able to inspect the property first, and you can negotiate a deal with the owner for a much, much lower price than you'll get competing with other bidders.

If you're thinking it's too much of a pain to deal with these people, think again. The tax delinquent owners are frequently people who have already made up their minds to walk away and lose everything to the government, so when you offer them something, anything, it's almost always a better deal for them. Believe it or not, they're usually actually happy to hear from you. Those that aren't willing to make a deal are usually not bitter or difficult to talk to either. Really, you're trying to do them a favor-- and they know it.

Current foreclosure rates won't last - act now!
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