There are two types of government tax sales used in the United States: one is tax deed sales and another is tax lien certificates. These certificates are issued against delinquent taxpayers who have not complied to pay their property taxes. A tax lien certificate has a face value of taxes owed along with administrative fees and interest.

At times, the government auctions tax lien certificates. All 50 states of US have different laws pertaining to this subject, and sometimes you may find that the procedures differ per county. Therefore, depending where the tax lien certificate is being auctioned, it can either be sold at that face value or it can be bidded upon. Some states also allow tax lien certificates to be bid on by interest rate. In this case, the person who agrees upon the lowest rate of interest on the tax lien certificate is announced as the winning bidder.

Once the tax lien certificate is sold, the delinquent taxpayer is required to pay back the amount of the lien plus interest accrued, typically 16-18%, back to the owner of the tax lien certificate. In case the delinquent taxpayers fails to repay within the required period of time as assigned by the court or the governing authority, the tax lien certificate holder is awarded a deed to the property.

To explain this in simple words, when you purchase tax lien certificates, you are guaranteed a fixed return on your investment. Depending on the state from where you purchase the certificate, the earnings may perhaps be as high as 50%. Even if you get paid less than 50%, your investment is protected with the actual property.

With tax lien certificates, the holder must make the required payment on the property tax payment for the property owner. And in turn, the property owner would pay the holder the agreed amount of taxes and the penalties so accrued. Thus, all you have to gain is a high yield percentage of interest or the possibility of a deed to that property.

Tax Liens provides detailed information about tax liens, government tax liens, tax lien auctions, and more. Tax Liens is affiliated with Tax Attorneys In California.