Nicholas Timpanaro 2015-01-16 01:11:25
In the face of our ever-changing economic climate, investors are constantly trying to find a better way to invest their dollars. Occasionally, they purchase tax sale certificates from the municipality. This type of investment, in most cases, gives the investor an 18 percent return on each dollar he or she has invested. This long-term investment may require additional funding to purchase the subsequent taxes that may come due. As with any investment, it is important to conduct an investigation into the property prior to bidding at an auction for any tax sale certificate. This way, investors can be more confident of receiving a return on their investment For instance, if an investor were to buy taxes on a property that had, on its premises, an abandoned gas station, the property might have EPA problems. Cleaning up these problems could in turn cost the investor more than he or she could have made from the investment. An informed investor would buy tax sale certificates that are against properties that appear to be in decent condition and can be rehabilitated as long as the investor ends up with the property at final judgment or has the tax sale certificate redeemed, thus collecting his profits. Municipalities hold a tax sale auction after the third fiscal quarter each year. This allows the municipality to recoup taxes that were not paid that year and help them meet their budget. At these auctions, third parties bid to buy the taxes at an interest rate of usually 18 percent, a rate set by the municipality. Once the bidding begins, the investors bid down the interest rate until no further bids are made. An investor may be willing to take only 10 percent on the original investment. There are times when the investor feels that the property taxes are a good enough investment to allow the bidding to go down to 0 percent. In these cases, investors would bid to pay an additional sum, a premium, for the tax sale certificate. The tax collector holds this premium and will refund the amount to the investor provided he or she forecloses or redeems the tax sale certificate within five years. Once the bidding is complete, the successful bidder receives a tax sale certificate. The certificate shows the amount the investor paid for the document, including the premium paid (if any). As the holder of the certificate, the investor must have the certificate recorded in the county where the property is located. The investor will be informed by the tax collector of any subsequent taxes due and will have the opportunity to pay those taxes. Doing so will prevent any subsequent tax sale, as the new tax sale certificate would have priority over the previous tax sale certificate. Unlike other liens, tax sales certificates have a priority over every prior lien. After two years of holding the tax sale certificate, the investor can start foreclosure proceedings and collect on his or her investment. To begin the process, the investor’s attorney would file a complaint with the state foreclosure unit. The attorney must notify anyone who has an interest in the property that the property is being foreclosed. The attorney does so through an institutional lien or a judgment in order to divest the lien holders’ interest in the property. However, only the owner of the property or a mortgagor who holds the property’s institutional lien can redeem the certificate by paying the judgment amount. The amount of the judgment for redemption would be the total sum of (1) the original cost of the certificate at the interest that was accepted by the bidder; (2) subsequent taxes paid at the rate set by the municipality; and (3) the cost of foreclosing due to the tax sale certificate. The tax sale foreclosure will end with a sale. Notice is given to all interested parties as to a time, place and amount of the sale. If the judgment is not redeemed the tax collector gives the final judgment to the investor, placing the property in the investor’s name or the owner of the property or the holder of the institutional mortgage pays the amount of the judgment. The foreclosed owner has up to one year to redeem the certificate. The new owner will need to hold the property until the right to redeem has expired before he or she can sell the property. All in all, a smart investor can make a great profit on their dollar by investing in tax sales certificates. This type of investment has always been around and, in today’s economic times, has become more prevalent. Like any investment, there is always a risk. By doing your due diligence, however, you can lower the risk and invest in properties that can give you a good return. Ultimately, anyone can become an investor in real estate taxes. Nicholas Timpanaro opened Fortune Title Agency, Inc. in 2000. Today, the family run business works on over 55 percent of the foreclosures in the state. For more information, visit www.fortunetitle.net.
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