ABOUT TAX CERTIFICATES
Every year, municipalities throughout the U.S. auction off their accounts receivables on monies owed by individual property owners in the form of real estate Tax Lien Certificates.
Tax Lien Certificates are liens secured against property (real estate) for non-payment of municipal charges. These charges include real estate taxes and water & sewer charges owed to the municipality.
Wages for school teachers, police officers, firefighters, bus drivers, municipal employees and other critical services are paid through the collection of property tax revenue. When a municipality is unable to collect these taxes, it jeopardizes the municipalities’ ability to provide these services to the taxpaying residents.
Municipalities are willing to offer purchasers of the Certificates certain rights of collection and income in exchange for immediate liquidity on the municipalities’ past-due tax receivables. The Certificate entitles an investor the right to receive all delinquency charges, penalties, and interest.
Typically, the value of a Certificate is approximately 2% of the tax appraiser’s value of the underlying property. Depending on the jurisdiction, after two or three years, the owners of these Certificates are entitled to have the issuing government agency auction the underlying property in order to pay off the total monies owed under the Certificate.
Tax Lien Certificates have a priority of repayment over and above almost any other lien except for a federal tax lien. Tax Lien Certificates are superior to mortgages, home equity lines, construction or other liens, and condo or home owner association liens and claims.