Q: I’ve heard that buyers can make a fortune by buying properties at a “tax lien sale”. What is involved with this?
A: Many agents and buyers wonder about how they can purchase a property for the past due taxes. It seems like a great idea to catch up someone’s taxes and get a deed for practically nothing. Unfortunately, there are a lot of misconceptions about how this process actually works. Each state is different, but here are the facts to remember for Georgia:
- Georgia does not sell tax lien certificates. Georgia does tax deed sales.
- You do not need to pre-register to bid at the tax sale, but you must be present to bid.
- Tax sales are held on the first Tuesday of each month just like foreclosure auctions.
- The opening bid for a property is the amount of tax due PLUS penalties, interest, FiFa costs, levy costs, administrative levy fee, certified mail costs, advertising costs and tax deed preparation and recording fee.
- The property is sold to the highest bidder, and payment is required IN FULL at the completion of the sale. Payment must be cash, cashier’s check or money order.
- The purchaser will receive a tax deed to the property, HOWEVER they cannot take immediate possession of the property, make any improvements or move onto the property. Georgia law allows the property owner to have a redemption period of 1 year.
- This means that the owner has the right to “repurchase” or “redeem” the property for 12 months. The redemption price is the bid amount plus any taxes paid by the purchaser after the tax sale plus any special assessments on the property plus 20% of the amount for the first year (or fraction of the year) which has elapsed since the date of sale and a 10% premium for each additional year plus sheriff and advertising costs.
- If the owner redeems the title, it places it back in the owner’s hands with all original liens still in place.
- A tax deed has the same force and effect as a lien.
- Prospective purchasers are strongly encouraged to seek legal counsel before buying a tax deed.
- No warranties are given or implied and clear title is not assured when buying a tax deed. The primary concern of the taxing authority is the payment of delinquent taxes.
- A tax deed only conveys “defeasible” title to the property. To get fee simple title, a tax deed purchaser must foreclose the right to redeem.
- If an owner does not redeem the property, the tax deed purchaser can file paperwork to foreclose on the tax deed and remove the right to redeem. Notice must be delivered by certified mail to the owner and any interest holders advising them of the foreclosure. Plus, it must be advertised in the newspaper for 4 consecutive weeks.
Although tax sales can be a lucrative investment, a lot of study and research is advisable before going forward.
And as always, if you are interested in buying, selling or leasing property, I would love to assist you! Please do not hesitate to call me at 404-843-2500. Until next time…peace!