What Is a Tax Lien?

A tax lien is placed on a property when an owner fails to pay property taxes. Tax liens can restrict the sale or transfer of property ownership.

TAX LIENS

Each year property owners are required pay taxes. Property taxes are contributions an owner must pay to the county or local municipality for ad valorum and non-ad valorum assessments. This can include county debt, library services, fire rescue, schools and solid waste disposal. When property owners fail to pay these taxes, the county or local municipality can place a lien on their property. A tax lien is considered an encumbrance against the sale of the property. This means a property owner cannot sell or transfer ownership of the property without satisfying the tax lien. This applies to all individual, business and bank-owned properties. 

TAX LIEN CERTIFICATES AND DEEDS

Tax liens are auctioned off to the public in the form of tax-lien certificates or tax deeds. They are often sold at discounts below the actual amount owed in property taxes. Since a property typically cannot be sold without paying the tax lien, this is often considered a guaranteed investment. When a tax lien is purchased at auction, payment is required in full.

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