Avoid foreclosure Tax Lien Foreclosures And How To Profit From Them Posted By: Maggie Dawson

The recent economic slowdown has resulted in more homeowners than ever finding themselves in foreclosure– either for failing to pay their mortgage, taxes, or both. However, as you may have already realized, investing in mortgage foreclosures is more headache than it’s worth. Not only do you have to deal with all the liens and second mortgages on these properties, but while you’re trying to flip the property, you’ve still got to pay the mortgage. Tax lien foreclosures, on the the other hand, are usually free of a mortgage. Why?

In order to keep from losing their stake in a property, mortgage companies make sure that a delinquent property never gets lost to tax sale by keeping the taxes current, regardless of if a homeowner pays their mortgage payment. So by the time a property makes it all the way to tax sale, there’s almost definitely not a mortgage on it– making tax lien foreclosures pretty darn appealing as an investment.

Unfortunately, it’s becoming increasingly difficult to successfully obtain property or buy liens at tax sale. The competition is fierce, and many of the people you’ll be bidding against are agents for large companies that solely invest in tax lien foreclosures. Since these companies have a lot of money to invest, they can afford to make a lower return on their investment– meaning they will outbid you most of the time.

Although it sounds hopeless, there is actually a much easier and more profitable way to invest in tax lien foreclosures– and one that gets around the annoyance of having to hold the lien until the homeowner’s redemption period is up. Also, unlike purchasing liens at tax sale, with this method you can inspect the property before you decide to invest in it. It’s quite simple: purchase the property directly from the delinquent homeowner.

In contrast to homeowners in mortgage foreclosure, the owners of tax lien foreclosures are often not battling with creditors and clearly don’t have a mortgage company breathing down their necks. Often, these properties have absentee owners– owners that have the property as a vacation home or second property, owners that are former landlords, or who bought the property with something in mind to do to it later, and then changed their minds. People who have inherited properties often end up letting them go to tax sale if, for example, they live across the country and/or have no desire to own the property.

If you can find these owners, you’re likely to find that they’re glad to hear from you and ready to let go of their property anyway– or didn’t even know what was happening in the first place– and are ready to sell to you for a few thousand, or even a few hundred dollars. If you do run across owners that still live in the property, you’ll usually find they’d much rather sell to you and get something for the property than to let it go to tax sale and potentially get nothing for it. It’s a win-win for all involved, and a great way to avoid bidding on tax lien foreclosures at auction.

This little-known method of investing in tax foreclosure properties is known as “deed grabbing” amongst the small number of real estate investors that practice it. It’s not difficult to do, and believe it or not, the owners of these properties are often happy to hear from you. Best of all? There’s very little competition in the field right now. Due to the current economic climate, there are more tax foreclosures than ever before, and will likely continue to be for some time.

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