Last Updated on September 8, 2025
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What Are Tax Liens and Tax Deeds?
A tax lien is a claim that stops the owner from selling or refinancing until the taxes are paid. Governments often sell these liens at auctions to investors. The investor pays the taxes owed and then collects the debt plus interest. Most of the time, the investor does not get the property; they earn money when the owner pays back the taxes.
A tax deed sale is when the government sells the property itself. The buyer may get full ownership if the original owner does not pay back the taxes within a set time. Different states use liens, deeds, or both to deal with unpaid taxes.
The Top 3 Reasons Why Liens & Deeds Go to the Tax Sale
- Financial Hardship
Life happens; job loss, medical emergencies, or unexpected expenses can overwhelm property owners, making it impossible to pay taxes. This unfortunate reality often leads properties to end up in tax sales. - Inherited Properties
Sometimes, heirs inherit properties they don’t want or can’t afford to maintain. Without a clear plan or the financial means to pay property taxes, these properties go to tax sale. - Neglect or Abandonment
Owners who abandon properties or neglect their tax obligations for years often find themselves losing their real estate through tax sales. This can happen with out-of-state owners or those unaware of their obligations.
The Government’s View
When people do not pay their property taxes, it hurts local budgets. Empty houses often become unsafe, and cities must pay to board them up, cut grass and respond to emergencies. To recover this cost, many local governments auction the tax lien or deed. The winning bidder pays at least the amount owed and earns interest on that payment. If the owner does not pay back the taxes, the bidder may get the property.
Selling liens gives the government quick cash, but does not always solve the problem of empty houses. If an investor only wants interest, they may not fix the property, leaving it vacant for longer. Some experts say that selling the deed instead of the lien helps get the property into new, responsible hands more quickly.
Why Investors Are Interested
Investors buy tax liens and deeds because they can earn high returns. Tax bills have grown in many places, and unpaid taxes have reached billions of dollars nationwide in recent years. Investors sometimes pay just a few hundred dollars for a small lien. They earn a profit through interest rates set by law, which can be anywhere from a few percent to over 20% depending on the state.
Yes! There are risks. Other liens or mortgages may be recorded against the property, and if you end up owning it, repairs and evictions can be costly. Do not assume you will get the property; most liens end when the owner pays the debt and interest.
How to Do Your Homework
Before bidding on a tax lien or deed, follow these basic steps:
| Step | What to do | Why it matters |
| 1 | Find potential properties through county treasurer lists or tax sale websites. | This helps you see what is for sale. |
| 2 | Research each property using parcel numbers to check its value, other liens and condition. | Make sure the property is worth more than the tax debt. |
| 3 | Learn the auction rules, such as bidding methods, interest rates and redemption periods. | Each county can have different rules. |
| 4 | Measure the risk by comparing the tax debt to the property’s value. | A high debt compared to value means greater risk. |
| 5 | Plan for outcomes like collecting interest or taking ownership. | Be ready for costs like repairs or legal fees if you get the property. |
This simple checklist can help you decide whether a tax lien or deed is a good buy. Experienced investors often visit properties and consult with local officials before bidding.
Frequently Asked Questions (FAQ)
No. Owners usually get many notices and have months or even years to pay before a sale. After the sale, most states give them a final period to repay the taxes and keep the property.
Common reasons include money problems, inheriting a property they do not want and neglecting or forgetting about the tax bills.
No. Most tax lien investors make money when the owner pays back the taxes plus interest. Taking ownership can involve more legal steps and costs.
Some say it helps cities pay for services and puts neglected properties back to use. Others worry that lien sales keep properties empty longer. Responsible investors try to help both themselves and the community.
Learn More
In the video above, Josh also shares a compelling story that highlights just one of these reasons and explains how investors like you can make a difference in this business.
Take Action Now
Watch the video to learn the inside scoop on Why Do Liens & Deeds Go to the Tax Sale? This knowledge could be the game-changer you’ve been waiting for in your investing journey.
Don’t miss our article on how to start with tax liens for additional insights!
Talk soon,
Dustin
