Last Updated on September 8, 2025
Table of contents
- Can you invest in tax liens using a self‑directed IRA?
- When are tax‑lien sale lists available and how soon can you start buying?
- Where can you find quality over‑the‑counter liens and deeds?
- How can small investors compete with hedge funds and banks?
- Do IRS tax liens matter if they appear on a property?
- What happens if you don’t foreclose after the redemption period?
- What is the redemption period and interest in Texas and Georgia?
- What should you consider when buying second‑year tax liens?
- What if the property owner files for bankruptcy?
- How do overages (excess proceeds) work and how can you help owners recover them?
- How can you build a buyer list for selling OTC properties?
- How do you get a tax‑sale list if the county says they don’t have one?
- Conclusion and next steps
Tax Lien & Deed Investing Q&A: Answers to Your Common Questions
Real estate investing can be confusing when you first encounter terms like tax liens and tax deeds. To help newcomers navigate this space, our team hosted a live Q&A session with students and compiled answers to some of the most common questions. Below we’ve turned that discussion into an easy‑to‑follow guide. Each heading asks a question we hear often and is followed immediately by a short answer. Later sections expand on strategies and tips.
Can you invest in tax liens using a self‑directed IRA?
Yes. A self‑directed IRA lets you hold alternative assets, including tax lien certificates, but every transaction must flow through the IRA’s checking account. You instruct your custodian to write checks for purchases and you deposit redemptions or sale proceeds back into the account. Rules against prohibited transactions mean you can’t invest in property you or certain relatives own, so always consult your custodian or an attorney.
When are tax‑lien sale lists available and how soon can you start buying?
Auction lists are released by counties a few weeks before each sale. Some counties post lists 21 days prior; others publish them in a local newspaper four weeks out. You generally can’t buy until the day of the auction, except for over‑the‑counter liens left unsold after the sale. Online auctions sometimes add new liens continuously, so check county websites regularly.
Where can you find quality over‑the‑counter liens and deeds?
Over‑the‑counter (OTC) liens and deeds are certificates or properties that didn’t sell at auction. Florida, parts of Arizona and California offer OTC lists. Most OTC properties are vacant lots or parcels with little value, so you need persistence and due diligence. In some states, counties continually add OTC liens; you can research them on county auction portals. Keep checking because occasional “diamonds” do appear when a sale falls through.
How can small investors compete with hedge funds and banks?
Large funds concentrate on major metropolitan counties where volumes are high. One way to avoid being outbid is to look at smaller or rural counties around big cities; competition drops and you can still find good deals. Hedge funds may enter a county temporarily and move on once they reach their allocation. Patience and flexibility in choosing counties can help individual investors succeed.
Do IRS tax liens matter if they appear on a property?
Federal tax liens become a factor only if the Internal Revenue Service files a Notice of Federal Tax Lien (NFTL) before the sale. IRS guidance explains that a purchaser takes property free of the tax lien if no notice has been filedirs.gov. If the lien is filed, the IRS has priority and could redeem the property, but they must reimburse the investor for the bid and fees. Always check county records for recorded federal tax liens and consider them when setting your bid.
What happens if you don’t foreclose after the redemption period?
In tax‑lien states, once the redemption period ends you must initiate foreclosure to obtain title. The county won’t do this for you. If you fail to file, the lien may eventually expire, and you could lose your claim. Because foreclosure rules vary by state, many investors hire an attorney to prepare the paperwork. In tax‑deed states with a redemption period (e.g., Georgia), you gain control when the period ends but still need to “bar” the right of redemption through proper notice
What is the redemption period and interest in Texas and Georgia?
- Texas – Homestead and agricultural properties have a two‑year redemption period; owners must repay the bid amount, recording fee, subsequent taxes and a 25 % premium in year one or 50 % in year two. Other properties can be redeemed within 180 days (about six months) with a 25 % premium.
- Georgia – The redemption price equals the purchase price plus taxes paid and a 20 % premium for the first year. After 12 months, the purchaser may start foreclosure by serving notice; an additional 10 % accrues for each subsequent year
Understanding redemption timelines helps you plan cash flow and exit strategies.
What should you consider when buying second‑year tax liens?
Paying taxes in subsequent years (called “subsequent liens”) is generally a good idea. It maintains your first‑position status and increases the amount on which you earn interest or penalties. In many counties you can proactively pay the next year’s taxes as soon as the bills are released. This can improve your return if the property is eventually redeemed. However, always ensure the property is still worth the investment before adding more capital.
What if the property owner files for bankruptcy?
Bankruptcy cases are rare in tax sales, but if one occurs the sale may be reversed. Investors typically receive a refund of the amount paid but not compensation for the time spent. Because bankruptcy law is complex, many investors avoid properties with signs of financial distress. If you do encounter a bankruptcy, consult legal counsel to ensure you follow all required procedures to recover your money.
How do overages (excess proceeds) work and how can you help owners recover them?
When a property sells for more than the tax debt, the surplus (overage) belongs to the former owner or junior lienholders. Some investors build businesses helping owners claim these funds. Because many owners are skeptical, you need to present yourself professionally — have a clear website, business cards and a transparent process. Explain the rules in plain language and show that you know the legal steps to collect overages.
How can you build a buyer list for selling OTC properties?
Having a good list of buyers is really important when you buy properties to sell later. Here are some easy ways to build that list
- Capture signs
While driving through neighborhoods, photograph “We Buy Houses” signs and contact those investors.
- Join or create meetups
Host a local real‑estate meetup to network; some students have built groups of 50+ people this way.
- Use classified ads
Platforms like Craigslist allow you to list properties; you can also run “ghost ads” that gauge interest, then collect emails for future deals.
- Segment your emails
When emailing prospects, send small batches (10–20 contacts) to avoid spam filters.
By consistently marketing, you’ll compile a list of people eager for discounted properties.
How do you get a tax‑sale list if the county says they don’t have one?
Sometimes county employees use different terminology (“foreclosure list,” “sheriff sale” or “delinquent tax sale”) and may inadvertently tell you no list exists. Call multiple departments — such as the treasurer, tax collector or sheriff’s office — and ask about tax sales. You can also search county websites or third‑party auction platforms. In some cases, calling a neighboring county will reveal the process, since many counties follow similar laws. Persistence pays off when gathering information.
FAQ
Yes. A self-directed IRA can hold tax lien certificates, but all purchases and redemptions must go through the IRA custodian. You cannot invest in property you or close relatives own.
OTC liens are unsold certificates or deeds available directly from the county. Most are low-value lots, but with persistence and due diligence you can find good deals.
Target smaller or rural counties where big funds usually don’t participate. These sales often have less competition and better discounts.
Yes, if a Notice of Federal Tax Lien is recorded. The IRS can redeem the property, but they must reimburse your bid and fees. Always check county records.
In lien states, you must initiate foreclosure yourself; otherwise, the lien may expire. In deed states like Georgia, you must “bar” the right of redemption to secure title.
Texas: 180 days for most properties with a 25% premium; 2 years for homestead/agricultural with 25–50% premiums.
Georgia: 1 year with a 20% premium, then 10% more for each year after.
The sale may be reversed. Usually, you’ll get your money back but not compensation for lost time. Legal guidance is recommended.
Conclusion and next steps
Investing in tax liens and deeds can be a profitable way to diversify your portfolio, but success requires diligence and ongoing education. We hope these answers give you a clearer picture of how auctions, redemption periods, federal tax liens and OTC opportunities work. To continue learning, check out some of our other guides like how to pick properties for tax deed sales.
We offer several free resources to help you navigate the world of tax lien and deed investing with confidence. Check out our free resources, which provides a short video series on the basics of tax liens and deeds. You can also view our auction calendar for upcoming tax sales. Additionally, book a free strategy call with us to discuss your first deal. Visit our free resources page to access these tools, and be sure to subscribe to our YouTube channel for weekly updates..
