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Investing in a tax deed foreclosure

On Behalf of | Nov 19, 2021 | Tax Lien Foreclosure |

As a real estate investor, you may be curious about the opportunity to purchase tax deed foreclosures. With this strategy, you buy a tax certificate on an outstanding property so you can renovate, resell or otherwise profit from the pending foreclosure.

Review the details about tax deed foreclosure to find out whether this type of investment is right for you.

Understanding tax deed foreclosures

When a property owner fails to pay taxes, the county auctions off the tax debt. If you win the tax deed bid, you can attempt to collect on the past-due taxes. If the attempt does not succeed, you can take steps to foreclose on and take possession of the property. You can pursue tax deed foreclosure on any property with outstanding tax debt, including inhabited and vacant residential, commercial and industrial properties as well as vacant land.

Reviewing considerations for tax deed investments

If you successfully bid on a tax debt, you usually have to pay the promised amount within 72 hours. Doing so gives you the potential opportunity to buy the home for less than market value.

Some states give the property owner a certain amount of time to repay the tax debt along with your bid plus interest. In Illinois, for example, a homeowner with six or fewer units has 30 months to redeem their property and avoid foreclosure. For abandoned properties, the redemption period decreases to 24 months.

Without the right legal paperwork, you may run into problems with a tax deed foreclosure. Conducting due diligence can help protect your investment with this type of strategy.