What is Tax Lien?
When the owner or landlord failed to pay taxes to the county or city in which the property is located, lien is placed by the authority on that property. A lien is a legal claim that has been owed due to unpaid taxes on the property. A property document with a lien attached cannot be sold or refinanced until the taxes are paid by the landlord. After paying all the dues on that property the tax lien is removed.
When a lien has been issued by the municipality to the landlord of his property due to unpaid amounts and taxes, a tax lien certificate is generated. A tax lien certificate stats all the dues, penalties, and tax amounts to pay on the property of the owner. Then these tax lien certificates are issued to the highest bidding investor. The tax lien can be purchased either in physical sitting, or online. It is necessary to know how a tax lien property can be purchased. A research must be done on the tax lien property to achieve success in their investments. An investor with a lowest rate of interest or paying the highest premium of bid will be awarded the lien. The investor must have a clear idea of choosing the right property like residential or commercial, undeveloped land, property with improvements and many more.
How to avoid Federal tax liens?
Federal Tax Lien can be avoided by paying the taxes fully in first place before being filed by the IRS. The IRS will not file a tax lien case on the landlord, if they have an installment or streamlined installment agreements. The IRS can remove the tax lien only if the tax lien has been filed with error, or when the amount has been paid by the taxpayer.
To become successful investors in the tax lien property, one should know how to buy tax lien with the highest investment return. They can also contact their state or county treasurer to find out when the next tax lien auction is held.