Avoiding Problems at Tax Auctions
As with any investment, tax deed auctions come with risks. It is possible to get carried away while bidding, for example, and bid more than a property is worth. To prevent this, it is a good idea to research a property carefully before you arrive at the auction and to set bidding limits for yourself. Since all homes sold at tax sales are sold "as is" careful research is a must.
Many potential homebuyers confuse tax deed auctions and tax lien sales. Sales of tax liens are in fact not purchases of property but purchases of the right to a tax lien. When a homeowner does not pay their property taxes, the county will sometimes place a tax lien against the home and eventually sell the right to this lien to investors to generate revenue. Investors who invest in a tax lien foreclosure are essentially loaning money to homeowners so that homeowners can pay their taxes. If the homeowner does pay their taxes, the investor gets a great return on their investment. If the homeowner does not pay their taxes, the investors gets the deed to the tax lien homes they have invested in. Both tax deed auctions and government tax lien sales are a great way to invest in real estate.