A tax lien gives the government legal claims to a property when the owner fails to pay the property taxes. Taxpayers who default in paying their taxes may have their assets, income, or securities seized by the Florida Department of Revenue or Internal Revenue Service (IRS) and auctioned to recover owed taxes.
Steps to Finding a Tax Lien on a Property in Florida
The first step in identifying a tax lien on a property is by knowing which authority is responsible for recording the lien in question. For instance, in Florida, a property tax lien is usually filed with the Clerk of Court or other government offices in the county where the taxpayer is located.
Other steps that can be taken include:
Visit the Assessor’s Office or Website
Searching the website of the county recorder or assessor can give you access to information concerning a property including the tax liens on it. All you will be needing are the name of the owner and/or the address of the property in question.
Additionally, you could visit the assessor’s office, county clerk’s office, or courthouse in person. This method might be more effective than a website search because staff in these offices will be able to guide you through your search.
Hiring a Title Company
Perhaps the best way to find out if the property has a tax lien is by enlisting the services of a title company. A title agency would not only thoroughly identify existing liens and unpaid taxes on the property but they can also:
- Identify any breach of contract in the existing documents
- Serve as a representative during the closing of the deal
- Offer experienced legal advice throughout the process
- Offer a quick and efficient escrow transfer process
- Ensure you are in accordance with the state’s laws regarding real estate transactions
- Issue title insurance on a cleared property.
In addition to all these, a title search agency can help you identify other common title defects that may cause problems in the future. They include:
- Errors in public records
- Improperly filed documents
- Undisclosed heirs
- Identity concerns
- Incorrect legal descriptions
- Disputes in survey and boundary
- Probate issues
- Bankruptcy filings.
How Do I Invest in Tax Liens in Florida?
Potential investors can buy property tax liens, like real property at auctions. The process of acquiring such properties is known as a tax lien sale. Although not every state in the United States allows tax lien sales, Florida does allow it. If you are looking to invest in one, read on.
How Does a Tax Lien Sale Work?
Typically, when a property owner defaults on tax payments, there is a waiting period ranging from a couple of months to a few years, depending on the state, after which the tax collector issues a notice to the property owner. After the notice is issued and the property owner is still unable to pay, the outstanding taxes are auctioned off at a tax lien sale.
The auctions may be held at a physical location or on an online website where the investors can either bid down on the interest rate on the lien or bid up a dividend they will pay for it. The bidder who goes home with the certificate is the individual who charges the lowest interest rate on the debt or who bids the highest, depending on the terms of the tax sale.
It is important to note that the certificate holder does not have full ownership of the property title until the redemption period expires.
Tips for Investing in Tax Liens
Just like every investment in real estate, there are practical tips to employ when investing in tax liens to ensure maximum profits.
Choice of Property
After deciding to invest in properties with tax liens, the next step is to decide on the kind of property you want to hold a tax certificate on. Such properties may be residential, commercial, undeveloped land, or property with improvements.
Contact the State or County’s Office
The next step is to find out the details of the next auction to make adequate preparation for it. The details you should be on the lookout for include:
- The location and time of the auction
- The lists of properties to be auctioned
- The requirements to participate in the auction and
- The rules guiding the auction.
Thorough research on the property to be auctioned reveals other vital information about the property, thus allowing you to verify whether it is risk-free or how much risk it carries. This investigation can also help you determine its current market value, especially in relation to the amount owed in tax.
In addition to payment of the outstanding taxes, investors in properties with tax liens need to ensure they have adequate cash reserves. This is to ensure they are not taken by surprise in the advent of extra expenses from the cost of repairs or any other hidden costs once they assume full ownership of the property.
Can Tax Lien Expire?
Yes, tax liens can expire. Most tax liens have an expiration date after the end of the redemption period. Once the lien expires, the lienholder is unable to obtain any outstanding compensation and if the property is put up for foreclosure, the lienholder may discover other liens on the property, which can make obtaining the property title hard.
Can Someone Take Your Property by Paying the Taxes in Florida?
Yes, you can forfeit your property if someone else pays the taxes on it and the period of redemption expires. Typically, when a taxpayer defaults on payment, he or she is offered a notice.
If the taxpayer is still unable to pay, the tax collector can sell the property to an individual willing to pay the taxes who then receives a tax lien certificate. The taxpayer still has about two years after this to redeem the tax payment and added interest rates. If this is not done within the timeframe, the title of the property is transferred to the new taxpayer.
A property tax lien is an avenue by which the government ensures that taxes owed are paid, either by the original taxpayer or a potential investor. Before closing on a property, you should ensure there are no tax liens by carrying out a title search to avoid incurring debts in the future.