Tax Lien Certificates and tax deed sales is the sale of residential or commercial property for unpaid property tax and charges related to the sale. Each year, property taxes bills are due by March 31st to prevent ending up being past due. As soon as the tax bill becomes past due, the Property Tax Collector holds sale to sell the tax bill.
The bidder offering the lowest interest rate at this type of auction is issued a Tax Lien Certificate, which is a guarantee to the the buyer that the Property Tax Bill will be paid including any interest. A tax lien certificate, or tax certificate is not a purchase of residential or commercial property; rather, it is a lien against the home by payment of the past due taxes.
If payment of the Tax Bill Certificate is not completed within 24 months from the date the Tax Lien Certificate is issued, the owner of the tax lien certificate can request for a public sale of the residential or commercial property. The tax lien certificate auction offering the residential or commercial property is known as a Tax Deed Auction. Funds received from this Tax Deed Sale are applied to the delinquency amount owed to the holder of the Certificate and along with any other expenses occurred for the sale to happen.
Survival of other Liens:
A tax deed sale is superior to most liens. Usually just liens of record that stay with the land, or those held by city government or county government make it through a tax deed sale. There is a crucial difference in between buying residential or commercial properties at a tax deed auction and buying them at a foreclosure sale. Successful bidders at a foreclosure auction can be held accountable for some liens like homeowner’s association dues.
Quiet Title Actions:
Quiet title action is a claim filed in circuit court where the residential or commercial property is to remove any clouds that appear on a real estate title. After buying a residential or commercial property at a tax deed sale, a quiet title action is almost always needed to insure the title or to make sure that other possible interest holders' claims are eliminated permanently. A quiet title action is to remove any and all claims to title that may prevent issuance of a title insurance policy guaranteeing a clear title conveyance. A quiet title action will enable a title insurance provider to issue a policy guaranteeing the real estate title to the residential or commercial property acquired and will make it possible to sell the residential or commercial property in the future, as long as all interested parties are named in the action and it is effectively served on them.
Additionally, if the successful bidder at a tax deed auction holds an interest in the residential or commercial property acquired and pays taxes on it for 4 years, then a quiet title action can be avoided. A title company is more likely to issue a title insurance policy on tax deed property after the 4 year period has elapsed, without a quiet title action, but some will still require a quiet tile action.