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What are Tax Lien Certificates?
Tax Liens are created by the local taxing government placing a lien on a property for unpaid property taxes. At some time during the year the local government sells these liens to investors and upon sale a Tax Lien Certificate is issued. The local government holds tax lien sales to sell these liens to tax lien investors.
Here is how it works: A property owner fails to pay the local government the property taxes due on their parcel of land. The local government begins to establish penalties for not paying on time. However, local governments need cash to fund their operations and IOUs don’t pay their bills. So what is a government to do? They hold a tax lien sale to sell the lien to an investor for cash and the new owner now gets the principal, interest and penalties when collected. When the property owner finally pays, the investor makes good on their tax lien investment.
A property tax lien certificate is different from a federal tax lien, state tax lien, or IRS tax lien.
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