What is a Real Estate Tax Deed?
To understand what a tax deed is, let’s back up and review how the tax sale is formed. Property taxes are imposed to help pay for cities, schools, and more. The entities depend on that revenue to meet their budget.
When property owners do not pay their taxes the entities still need the revenue. They do what they can to collect the back taxes, but sometimes all efforts are in vain. When this occurs they turn to investors for help.
The county will create a tax deed and sell it through an auction. The starting bid is usually the taxes owed plus fees. There are often fees added on top of the bid in addition to the winning bid.
The auction styles vary, but the price is bid up until the highest bidder wins. The winner of the auction will receive a deed in the mail usually within three weeks.
Some of the tax deeds have a redemption period where the owner that lost the property can pay the starting bid plus a set interest amount within a specified period of time.
Tax deeds are not offered at all tax sales. There are other instruments that can be offered at tax sales like tax liens which I will cover in another post. There are also auctions that are closed to the public. The tax deeds are only sold to banks and other large financial institutions in bulk.
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