Government Tax Foreclosure Properties

Investing in government tax foreclosure properties may be a lucrative investment. When a property owner fails to pay federal or state taxes, the government can place a tax lien on the property. This lien supersedes all other types of liens on the property so if the property owner does not repay the lien, the property is auctioned off.

How Tax Foreclosure Happens

Government tax foreclosure can occur whenever a property owner does not pay property taxes or income taxes. The Internal Revenue Service may place a lien on a home after failure to pay tax debt. When this happens, all creditors receive notification by the government that the lien is in place. This motion gives the IRS the right to all property - including the land, buildings and even an individual's car - as well as all accounts receivable in a business situation.

The tax lien can be removed from the property if the property owner satisfies his taxes due, which often includes fees and interest, or the IRS accepts a bond submitted by the property owner agreeing to pay the debt. When this fails to happen, the property enters foreclosure. Within a period of six months the property is seized and sold, liquidating it to pay the required taxes owed by the owner.

A similar situation happens when the property owner does not pay property taxes. The county or other government collecting property taxes place the tax lien. When the tax debt remains unpaid, the property is sold at local auction to repay the owner's debts.

Throughout this process the property owner receives several opportunities to become current on not only their tax debt, but also their mortgage payments or other liens on the property. To avoid foreclosure, these debts must be paid prior to the court ruling to sell the property. That ruling usually takes place up to 30 days prior to the auction of the property.
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Investing in Government Tax Foreclosure Properties

Purchasing government tax foreclosed properties is an option for investors. These properties are not often sold through standard procedures, but are auctioned off at local sales. Investors should do their homework to learn as much as they can about the property before investing in it.

* Be notified of properties entering government foreclosure. Watch local newspapers and court reports for notifications of foreclosures in the area.

* Arrange to view the property prior to the auction. This may be possible if the property owners have moved out.

* Be prepared to make a sizable down payment on auction day. A minimum of 10 percent down is often required to be paid either in cashier's check or through a letter stating funding availability.

* Know the market value of the property. Some investors work with real estate agents or research online to learn the value of the property prior to the auction to ensure they do not pay too much for it.

* Do not be outbid. Many auctions result in several bidders. In some cases, individuals are not permitted at the auction themselves. Rather, their real estate agent must handle the negotiation for them. Ensure your real estate agent is a HUD approved agent to ensure this is possible.

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Tips for Government Foreclosure Purchases

There are plenty of options available for those who wish to invest in government tax foreclosure properties. In many cases, these properties are highly valuable since the property is well cared for by the previous owners. In other cases, the property is in a state of neglect. For those hoping to buy an affordable home, these properties can be an ideal investment.
The following are resources for locating government foreclosures available throughout the country. Local and state governments may offer their own website or may mail out auction notices to those registered to receive them.

* HUD: The U.S. Department of Housing and Urban Development offers guidance on purchasing HUD homes, or homes acquired by HUD due to foreclosure. Property listings are available at the website.

* ForeclosureDeals.com: Use the services at ForeclosureDeals.com to locate government foreclosures going to auction.

* RealtyTrac: RealtyTrac is one of the largest online resources for foreclosures, including government tax foreclosures. Search for available properties nationwide at the website.


Initial Author: Sandy Baker
Recent Contributors: Tamsen Butler